United Rentals Inc.'s (URI) 1Q earnings jumped 27% on lower operating costs from a shift in focus to rentals from sales, the company announced early Wednesday morning. Net income for the firm advanced to $38M, or $0.34 per share, from $30M, or $0.28 per share, in the year-ago period. The result was in line with estimates from analysts. Revenues, however, dropped 8% to $772M from $838M last year as the company cut back on equipment sales. Rental revenues did manage to edge higher by 1% to $571M. Costs of revenues dropped 9.7% to $524M, with the biggest declines coming in costs for sales of new equipment and contractor supplies. As a result, United Rentals cut its full-year earnings target after reviewing forecasts for industry spending. URI now expects to earn between $2.65 and $2.85 per share, while it’s previous estimates, issued in January and reaffirmed in February, ranged from $2.80 to $3 per share. Analysts are anticipating a profit of $2.70 per share. The company stated that it is basing their new guidance on recent industry forecasts for spending in its primary end markets which is presumably going to contract as economic growth slows. Shares of United Rentals gained $0.15, or 0.8%, to $18.86 in today’s trading.
United Rentals, Inc. incorporated in 1997, is an equipment rental company. During the year ending December 31, 2007, excluding its traffic control operations, the Company's network consisted of 697 rental locations in the United States, Canada and Mexico. It offers for rent over 2,900 classes of rental equipment, including heavy machines and hand tools, to customers that include construction and industrial companies, manufacturers, utilities, municipalities, homeowners and others. As of December, 2007, the Company's fleet of rental equipment included over 260,000 units. The fleet included general construction and industrial equipment, such as backhoes, skid-steer loaders, forklifts, earth-moving equipment, material-handling equipment, compressors, pumps and generators; aerial work platforms, such as scissor lifts and boom lifts; general tools and light equipment, such as pressure washers, water pumps, heaters and hand tools, and trench safety equipment for underground work, such as trench shields, aluminum hydraulic shoring systems, slide rails, crossing plates, construction lasers and line testing equipment. In addition to renting equipment, the Company sells new and used rental equipment, as well as related contractor supplies, parts and service. The Company routinely sells used rental equipment and invests in new equipment in order to manage repairs and maintenance costs, as well as the age, composition and size of its fleet. It also sells used equipment in response to customer demand for this equipment. It also sells used equipment through its Website, which includes an online database of used equipment available for sale. In addition, the Company holds United Rentals Certified Auctions on eBay to provide customers with another convenient online tool for purchasing used equipment.
The Company's target customers for service and other revenue are its existing rental customers, as well as those who purchase both new and used equipment from its branches. United Rentals sells equipment for many equipment manufacturers. The manufacturers that it represents and the brands that it carries include Genie, JLG and Skyjack (aerial lifts); Multiquip, Wacker and Honda USA (compaction equipment, generators and pumps); Sullair (compressors); Skytrak and Lull (rough terrain reach forklifts); John Deere and Takeuchi (skid-steer loaders and mini-excavators); Terex (telehandlers), and DeWalt (generators). The Company also has two subsidiaries that are involved in the development and marketing of software. One of the subsidiaries develops and markets its Rentalman software package, which is an enterprise resource planning application used by United Rentals and several other equipment rental companies. The other subsidiary develops and markets its Infomanager software, which provides a solution for creating an advanced business intelligence system. Infomanager helps with extracting raw data from transactional applications and transforming it into meaningful information and saving it into a database that is specifically optimized for analytical use.
United Rentals is the first company many commercial, industrial, utilities, municipalities, and homeowners think of when they have large projects and need equipment and supplies to complete the job. URI also trains customers in specialized work, and offers an entire line of convenient supplies to its customers for their specific needs on the job. Commercial business is 75% of their revenue, while industrial is 15% and homeowners round out the last 10%. URI was a start-up business 10 years ago and has grown to a $3.7B per year business through acquisitions and internal growth. They compete in a highly fragmented business and have the #1 market share in North America. Since URI is the world’s largest equipment rental provider, they create a size advantage that gives it economies of scale that smaller mom and pop shops do not have. URI has $4.0B of rental equipment, which means they are buying in bulk so they are getting a volume discount for their purchases. Equipment rental is a positive trend as more companies prefer to rent versus buy equipment to reduce capital costs, use equipment only when needed, remove the costly storage and maintenance requirements and have an inventory of equipment around the world at any given time. About 20% of their capital spent is for expanding the equipment versus the 80% to replace retired equipment. URI has been acquiring small companies, $10M to $30M, to add to their existing base as they are in a highly fragmented business that is ripe for consolidation.
The market currently values United Rentals at $1.66B. This is well below its property, plant& equipment (PP&E). The company values its PP&E at $3.98B. Of that, $2.918B consists of rental equipment. Assuming the aerial lift equipment, earth moving equipment, forklifts and trench machines are valued at 50% it makes it possible to value the equipment at $1.459B or $17 per share. At these levels the stock trades at 1.7 times cash flow and 3.4 times earnings, while United Rentals normally trades at 11 times earnings. Its return on equity for the past twelve months is 17% but a normalized return on equity of 15% is more realistic. Gross margins have consistently averaged more than 30% and operating margins are averaging 15%, with current numbers of 46.7% and 17.7% respectively. As you can see the business currently trades with a margin of safety according to my earnings power valuation. In addition, United Rentals has the assets to provide the intelligent investor safety just in case the company hits a speed bump. Since URI only has a 7% market share in the North American arena, they have plenty of room to grow in their current market plus have ample opportunity to pursue Europe, Asia, and South America.
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Wednesday, April 30, 2008
Tuesday, April 29, 2008
BetterTrades looks at Big Lots Inc. - April 29, 2008
Discount retailer Big Lots Inc. (BIG) raised its same-store sales outlook for the 1Q on Tuesday, citing strong sales of furniture, consumables and seasonal merchandise. Big Lots now expects same-store sales or sales in stores open at least one year, to increase to the low-to-mid 3% range, versus prior expectations of an increase between 1% and 2%. Big Lots said sales of seasonal merchandise ramped up after a slow start to the quarter, as weather improved nationwide. Results were also helped by two closeout deals that benefited same-store sales by 1.5% to 2%, the company reiterated. Same-store sales, or sales at stores open at least a year, is a key indicator of retailer performance since it measures growth at existing stores rather than from newly opened ones. In Tuesday’s trading, Big Lots shares added $0.11, or 0.4%, to $26.84, from their Monday’s session close of $26.73. After hitting a one-year high of $36.15 in May of last year, the stock hit a one-year low of $12.40 this past January. Big Lots’ shares are on the rise as of recent after JP Morgan analysts upgraded the stock to "Overweight" from "Neutral." Technical indicators for BIG are bullish, while S&P analysts are giving the stock a neutral 3 Stars “Hold” rating.
Big Lots, Inc., incorporated in May 2001, through its wholly owned subsidiaries is a national broadline closeout retailer. As of February 2, 2008, the Company operated a total of 1,353 stores in 47 states. The Company's merchandising categories include Consumables, Home, Furniture, Hardlines, Seasonal, and Other. The Consumables category includes food, health and beauty, plastics, paper and pet departments. The Home category includes domestics, stationery, and home decorative departments. The Furniture category includes the upholstery, mattresses, ready-to-assemble, and case goods departments. Case goods consist of bedroom, dining room, and living room furniture. The Hardlines category includes the electronics, appliances, tools, and home maintenance departments. The Seasonal category includes lawn & garden, Christmas, summer, and other holiday departments. The Other category includes the toy, jewelry, infant accessories, and apparel departments. Of the Company's 1,353 stores, 501 stores operate in four states: California, Texas, Ohio, and Florida, and sales in these states represent 39% during the year ended February 2, 2008, fiscal 2007, net retail sales. As of February 2, 2008, the Company operated five regional closeout distribution centers and two furniture distribution centers placed across the United States. Its regional closeout distribution centers are owned and located in Ohio, California, Alabama, Oklahoma, and Pennsylvania. Its two furniture distribution centers are located in Ohio (owned) and California (leased). In addition to these merchandise distribution centers, it owns or leases warehouses in Ohio and California that distribute store fixtures and supplies. The combined output of merchandise distribution facilities was approximately 2.6 million cartons per week in fiscal 2007.
With all the talk of a consumer-led recession, it appears rather unlikely that any part of the retail sector would be viewed with a bullish eye. While both the retail sector and the broader market, as measured by the Standard & Poor's 500, set respective major lows in January, it may be evident now that the broader market may be knocking on the door of a breakout, in which case, the retail sector is likely to join in with a breakout of its own. Big Lots, which specializes in buying closeout items from other retailers and selling them at a discount, has streamlined its business model to grow earnings even in a weak consumer spending environment. Big Lots has continued to focus on their strong business strategy which has enabled them to drive ahead to record EPS performance in 2007. The company expanded their operating profit rate, turned their inventory faster, and generated nearly $250M of cash flow in what most have described as a very difficult economic environment.
In early March, the company reported 4Q net income of $92.0M, or $1.04 per share, for the 13-week quarter of fiscal 2007. This compares to net income of $104.3M, or $0.94 per share for the 14-week quarter of fiscal 2006. For the 52-week fiscal 2007 ending February 2nd, 2008, net income was $158.5M, or $1.55 per share, compared to net income of $124.0M, or $1.11 per share, for the 53-week fiscal 2006. Analysts had expected $0.83 per share. BIG has now estimated fiscal 2008 income from continuing operations will be in the range of $1.70 to $1.80 per share compared to income from continuing operations of $1.41 per diluted share for fiscal 2007. This guidance for EPS growth in the range of 21% to 28% compared to last year is based on an expected increase in comparable store sales of approximately 1% to 2% and continued expense leverage. The company has also been able to show an outstanding history of beating estimates. Over the past four quarters, it has posted an average surprise of 39.7%. All four covering analysts have lifted their numbers for this year over the past month. During that time, current year earnings estimates have been raised $0.14 to $1.74 per share. Analysts expect a further increase of 12.5% in earnings growth next year.
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Big Lots, Inc., incorporated in May 2001, through its wholly owned subsidiaries is a national broadline closeout retailer. As of February 2, 2008, the Company operated a total of 1,353 stores in 47 states. The Company's merchandising categories include Consumables, Home, Furniture, Hardlines, Seasonal, and Other. The Consumables category includes food, health and beauty, plastics, paper and pet departments. The Home category includes domestics, stationery, and home decorative departments. The Furniture category includes the upholstery, mattresses, ready-to-assemble, and case goods departments. Case goods consist of bedroom, dining room, and living room furniture. The Hardlines category includes the electronics, appliances, tools, and home maintenance departments. The Seasonal category includes lawn & garden, Christmas, summer, and other holiday departments. The Other category includes the toy, jewelry, infant accessories, and apparel departments. Of the Company's 1,353 stores, 501 stores operate in four states: California, Texas, Ohio, and Florida, and sales in these states represent 39% during the year ended February 2, 2008, fiscal 2007, net retail sales. As of February 2, 2008, the Company operated five regional closeout distribution centers and two furniture distribution centers placed across the United States. Its regional closeout distribution centers are owned and located in Ohio, California, Alabama, Oklahoma, and Pennsylvania. Its two furniture distribution centers are located in Ohio (owned) and California (leased). In addition to these merchandise distribution centers, it owns or leases warehouses in Ohio and California that distribute store fixtures and supplies. The combined output of merchandise distribution facilities was approximately 2.6 million cartons per week in fiscal 2007.
With all the talk of a consumer-led recession, it appears rather unlikely that any part of the retail sector would be viewed with a bullish eye. While both the retail sector and the broader market, as measured by the Standard & Poor's 500, set respective major lows in January, it may be evident now that the broader market may be knocking on the door of a breakout, in which case, the retail sector is likely to join in with a breakout of its own. Big Lots, which specializes in buying closeout items from other retailers and selling them at a discount, has streamlined its business model to grow earnings even in a weak consumer spending environment. Big Lots has continued to focus on their strong business strategy which has enabled them to drive ahead to record EPS performance in 2007. The company expanded their operating profit rate, turned their inventory faster, and generated nearly $250M of cash flow in what most have described as a very difficult economic environment.
In early March, the company reported 4Q net income of $92.0M, or $1.04 per share, for the 13-week quarter of fiscal 2007. This compares to net income of $104.3M, or $0.94 per share for the 14-week quarter of fiscal 2006. For the 52-week fiscal 2007 ending February 2nd, 2008, net income was $158.5M, or $1.55 per share, compared to net income of $124.0M, or $1.11 per share, for the 53-week fiscal 2006. Analysts had expected $0.83 per share. BIG has now estimated fiscal 2008 income from continuing operations will be in the range of $1.70 to $1.80 per share compared to income from continuing operations of $1.41 per diluted share for fiscal 2007. This guidance for EPS growth in the range of 21% to 28% compared to last year is based on an expected increase in comparable store sales of approximately 1% to 2% and continued expense leverage. The company has also been able to show an outstanding history of beating estimates. Over the past four quarters, it has posted an average surprise of 39.7%. All four covering analysts have lifted their numbers for this year over the past month. During that time, current year earnings estimates have been raised $0.14 to $1.74 per share. Analysts expect a further increase of 12.5% in earnings growth next year.
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Monday, April 28, 2008
BetterTrades looks at Enterprise Products Partners LP
Enterprise Products Partners LP, (EPD) which transports, processes and stores natural gas, announced early Monday that the company’s 1Q profits more than doubled on stronger shipping volumes. Net income for the three months surged to $259.6M, or $0.51 per unit, compared with $112M, or $0.20 per unit. Analysts polled expected, on average, earnings per unit of $0.33. Revenues for the quarter jumped to $5.68B from $3.32B, while analysts had expected revenues of $4.72B. In addition to strong earnings numbers, onshore natural gas transportation volumes increased 16%. Demand for natural gas liquids, natural gas and crude oil and the company’s midstream infrastructure services, resulted in each of their business segments having an exceptional quarter. Cash flows and volume contributions from new assets such as the Independence project, as well as solid year-over-year performance from our other assets, resulted in a substantial increase in earnings before interest, taxes, depreciation and amortization and distributable cash flow. At the close of today’s trading session, shares of Enterprise were slightly higher on the day, up $0.24, or 0.8%, to close at $30.29 per share.
Enterprise Products Partners L.P., a midstream energy company, provides services to producers and consumers of natural gas, natural gas liquids (NGL), crude oil, and petrochemicals in North America, the continental United States, and Gulf of Mexico. It operates in four segments: NGL Pipelines & Services, Onshore Natural Gas Pipelines & Services, Offshore Pipelines & Services, and Petrochemical Services. The NGL Pipelines & Services segment engages in natural gas processing and related NGL marketing activities, and import and export terminal operations, as well as including NGL pipelines of approximately 13,758 miles, and related storage and fractionation facilities. The Onshore Natural Gas Pipelines & Services segment includes approximately 17,758 miles of onshore natural gas pipeline systems that provide for the gathering and transmission of natural gas, and is involved in natural gas marketing activities. The Offshore Pipelines & Services segment comprise approximately 1,555 miles of offshore natural gas pipelines that serve production areas, along with 914 miles of offshore Gulf of Mexico crude oil pipeline systems, and 6 multipurpose offshore hub platforms with crude oil or natural gas processing capabilities. The Petrochemical Services segment includes five propylene fractionation facilities, an isomerization complex, and an octane additive production facility, as well as 683 miles of petrochemical pipeline systems. Enterprise Products GP, LLC serves as the general partner of the company. The company was founded in 1968, currently employs just fewer than 2,000 workers and is based in Houston, Texas.
Enterprise Products Partners is among the nation's largest pipeline operators. The firm owns nearly 900 miles of crude oil pipelines and 33,000 miles of natural gas, natural gas liquids and petrochemical pipelines. Other assets include several gas import terminals and storage facilities, two dozen processing plants, and a number of fractionation facilities, which separate raw streams of NGL into various products like ethane and propane. The company also has a network of gathering and processing facilities concentrated along the Gulf Coast. Following a series of acquisitions, Enterprise is now one of the nation's largest publicly-traded energy partnerships. As a master limited partnership (MLP), the company is generally exempt from federal income taxes, provided it distributes the lion's share of its cash flows to shareholders. This special status allows MLPs to shell out generous payments, although these distributions typically don't qualify for the reduced 15% dividend tax rate. Typically MLP investors pay regular income tax rates on 20% of their cash distributions. For many, partnership products taxes are on the remaining 80% or so and are usually deferred until the investor sells. All of this has translated into a steadily rising stream of distributable cash flows. Following record financial results in 2006, the company has generated cash flows in excess of $1.19B through the final three quarters of 2007. As a result, management just boosted quarterly distributions to $0.5075 per share, or $2.03 annually. That marks the 14th consecutive quarterly increase, and overall the payout has surged by 122% over the past decade.
As opposed to the "upstream" business of exploration and production of gases, Enterprise is a "midstream" energy player, a sector coveted for its steady cash generation potential. Much of Enterprise's diverse revenue stream comes from pipeline charges, which are influenced more by volume flow than by volatile commodity prices. And the firm's assets are focused in the nation's most reliable supply basins, those representing approximately 90% of the production in the lower 48 states. Enterprise's network transports 1.8 million barrels of NGL and 7.9 trillion BTUs of natural gas every day. Natural gas consumption isn't slowing down, as management for Enterprise is expecting the rising volume of gas flowing through its pipelines and facilities to lead to heavier cash flows down the line. Most importantly, the company is also wrapping up $2.1B worth of expansion projects that are just now coming online and could be key growth drivers going forward. From the beginning of 1999 through the end of October last year, EPD delivered an eye-popping total return of more than 500%, compared to just 45% for the S&P 500. However, with a sizeable yield of 6.6% and a good long-term outlook, the stock could continue upwards for the next couple of years.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Enterprise Products Partners L.P., a midstream energy company, provides services to producers and consumers of natural gas, natural gas liquids (NGL), crude oil, and petrochemicals in North America, the continental United States, and Gulf of Mexico. It operates in four segments: NGL Pipelines & Services, Onshore Natural Gas Pipelines & Services, Offshore Pipelines & Services, and Petrochemical Services. The NGL Pipelines & Services segment engages in natural gas processing and related NGL marketing activities, and import and export terminal operations, as well as including NGL pipelines of approximately 13,758 miles, and related storage and fractionation facilities. The Onshore Natural Gas Pipelines & Services segment includes approximately 17,758 miles of onshore natural gas pipeline systems that provide for the gathering and transmission of natural gas, and is involved in natural gas marketing activities. The Offshore Pipelines & Services segment comprise approximately 1,555 miles of offshore natural gas pipelines that serve production areas, along with 914 miles of offshore Gulf of Mexico crude oil pipeline systems, and 6 multipurpose offshore hub platforms with crude oil or natural gas processing capabilities. The Petrochemical Services segment includes five propylene fractionation facilities, an isomerization complex, and an octane additive production facility, as well as 683 miles of petrochemical pipeline systems. Enterprise Products GP, LLC serves as the general partner of the company. The company was founded in 1968, currently employs just fewer than 2,000 workers and is based in Houston, Texas.
Enterprise Products Partners is among the nation's largest pipeline operators. The firm owns nearly 900 miles of crude oil pipelines and 33,000 miles of natural gas, natural gas liquids and petrochemical pipelines. Other assets include several gas import terminals and storage facilities, two dozen processing plants, and a number of fractionation facilities, which separate raw streams of NGL into various products like ethane and propane. The company also has a network of gathering and processing facilities concentrated along the Gulf Coast. Following a series of acquisitions, Enterprise is now one of the nation's largest publicly-traded energy partnerships. As a master limited partnership (MLP), the company is generally exempt from federal income taxes, provided it distributes the lion's share of its cash flows to shareholders. This special status allows MLPs to shell out generous payments, although these distributions typically don't qualify for the reduced 15% dividend tax rate. Typically MLP investors pay regular income tax rates on 20% of their cash distributions. For many, partnership products taxes are on the remaining 80% or so and are usually deferred until the investor sells. All of this has translated into a steadily rising stream of distributable cash flows. Following record financial results in 2006, the company has generated cash flows in excess of $1.19B through the final three quarters of 2007. As a result, management just boosted quarterly distributions to $0.5075 per share, or $2.03 annually. That marks the 14th consecutive quarterly increase, and overall the payout has surged by 122% over the past decade.
As opposed to the "upstream" business of exploration and production of gases, Enterprise is a "midstream" energy player, a sector coveted for its steady cash generation potential. Much of Enterprise's diverse revenue stream comes from pipeline charges, which are influenced more by volume flow than by volatile commodity prices. And the firm's assets are focused in the nation's most reliable supply basins, those representing approximately 90% of the production in the lower 48 states. Enterprise's network transports 1.8 million barrels of NGL and 7.9 trillion BTUs of natural gas every day. Natural gas consumption isn't slowing down, as management for Enterprise is expecting the rising volume of gas flowing through its pipelines and facilities to lead to heavier cash flows down the line. Most importantly, the company is also wrapping up $2.1B worth of expansion projects that are just now coming online and could be key growth drivers going forward. From the beginning of 1999 through the end of October last year, EPD delivered an eye-popping total return of more than 500%, compared to just 45% for the S&P 500. However, with a sizeable yield of 6.6% and a good long-term outlook, the stock could continue upwards for the next couple of years.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Friday, April 25, 2008
BetterTrades looks at Eaton Corporation
Eaton Corp.'s (ETN) announced that the company’s 1Q profits increased sharply as demand from international markets pushed sales higher, the industrial manufacturer stated early last week. Eaton, whose products include hydraulics, electrical systems and drivetrain systems, said net income jumped to $247M, or $1.64 per share, from $234M, or $1.56 per share, a year ago. Excluding acquisition-related charges in each period, profits advanced to $1.70 from $1.62 last year. Analysts expected profits of $1.66 per share. Sales for the company increased 12% to $3.5B from $3.11B a year earlier. Chief Executive Alexander Cutler said in a statement, "In the first quarter, our end markets performed about as we had expected, buoyed by the strength in international markets." Additionally, Eaton Corp. raised its 2008 profit target after 1Q earnings came in better than expected. Eaton, whose products include hydraulics, electrical systems and drivetrain systems, expects net income of $7.30 to $7.80 per share, $0.05 higher on each end than its previous forecast, while expecting operating profits of $7.80 to $8.30 per share. Analysts are expecting $7.78 per share. The company attributed the higher target to better-than-expected 1Q earnings, which climbed sharply and exceeded analyst targets on strong demand from abroad. For the 2Q, the company expects profits between $1.80 and $1.90 per share, with operating earnings pegged between $1.90 and $2 per share, with analysts expecting $1.92 per share. Shares of ETN finished the day higher, up $0.45, or 0.5%, at $86.49.
Eaton Corporation designs, manufactures, markets, and services electrical systems and components worldwide. It offers electrical products for power quality, distribution, and control; fluid power systems and services for industrial, mobile, and aircraft equipment; intelligent truck drivetrain systems for safety and fuel economy; and automotive engine air management systems, powertrain solutions, and specialty controls for performance, fuel economy, and safety. The company offers various electrical products, including low and medium voltage power distribution and control products; circuit breakers, and assemblies and components used in managing distribution of electricity; drives, contactors, starters, power factor, and harmonic correction products; and sensors used for position sensing. Eaton's fluid power products comprise pumps, motors, hydraulic power units, hose and fittings, transaxles, transmissions, electro-hydraulic pumps, power and load management systems, and other hydraulic power generation systems; valves, cylinders, electronic controls, cockpit controls, electromechanical actuators, sensors, illuminated, and integrated displays and panels, and other controls and sensing products; and heavy-duty drum and disc brakes, clutches, and controllers for offshore oil and gas exploration, mining, and metal forming markets. In addition, the company offers agricultural mechanical transmissions; duty automated transmissions; clutches; transfer boxes, gearshift mechanisms, and rotors; and diesel-electric hybrid power systems for commercial vehicles and buses; and automotive products consisting of engine valves, cylinder heads, air and hydrogen management devices for fuel cells, electronically controlled traction modification devices, compressor control clutches for mobile refrigeration, on-board vapor recovery systems, fuel level senders, and turbocharger waste gate controls. The company was founded in 1916, currently employs just over 64,000 people and is headquartered in Cleveland, Ohio.
Eaton is diversified across several important industries with a diversified product line within those industries, making Eaton a good proxy on the economy. Driving earnings are Eaton’s 55% international exposure and extra strong strength in aerospace and agricultural equipment. Eaton a large company that supplies important aircraft parts to both Boeing and Airbus and has an attractive current valuation. Eaton in partnership with Hamilton Sundstrand recently won two contracts to supply electrical contactors and hydraulic pumps for the Boeing 787. From a valuation perspective, Eaton looks very attractive with a P/E Ratio of 12.84, a forward P/E Ratio of 9.53 and Price/Sales Ratio of 0.95. The 2.4% dividend yield is just above the average dividend yield of the S&P 500. The main cause for concern with Eaton is its leveraged balance sheet which carries $4.17B in short, current and long term debt when compared to just $2.36B in cash and short-term investments.
Looking at the company’s bookings, to give you a sense for kind of their ongoing activity, their Electrical segment bookings were up by some 3% this past quarter, and the company has been operating at very high levels in this business. Within the Electrical segment, it was a very big quarter as sales were up some 20%, 11 points of that coming from acquisitions, small contribution from ForEx the majority was then coming from end market growth as 7%. Operating profits were up 12.5%, compared to 11.3% last year. Hydraulics orders were up by some 6%, and the real answer there is that although it is a fairly flat condition here in the U.S., there is a much stronger condition outside of the U.S., and rest of the world. Meanwhile, the Aerospace orders were up a very strong 25% in the quarter, again, giving confirmation of the many new programs and activities and the building production levels in that arena for the firm. Eaton Corp faces competition from other diversified industrial conglomerates like Danaher (DHR), United Technologies (UTX), Emerson (EMR) and Parker-Hannifin (PH). If you were to consider just the aerospace division, competitors would include Moog Inc (MOGA), Woodward Governor Company (WGOV), Astronics Corporation (ATRO) and Crane Co (CR). For the future, Eaton has designed a hybrid electric powertrain that is currently used in some FedEx (FDX) delivery trucks and could gain widespread adoption in the future, and Eaton recently reported results that were better than analyst estimates and also raised guidance for 2008. With that, there is room for the company to continue its upward trend back to triple-digits.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Eaton Corporation designs, manufactures, markets, and services electrical systems and components worldwide. It offers electrical products for power quality, distribution, and control; fluid power systems and services for industrial, mobile, and aircraft equipment; intelligent truck drivetrain systems for safety and fuel economy; and automotive engine air management systems, powertrain solutions, and specialty controls for performance, fuel economy, and safety. The company offers various electrical products, including low and medium voltage power distribution and control products; circuit breakers, and assemblies and components used in managing distribution of electricity; drives, contactors, starters, power factor, and harmonic correction products; and sensors used for position sensing. Eaton's fluid power products comprise pumps, motors, hydraulic power units, hose and fittings, transaxles, transmissions, electro-hydraulic pumps, power and load management systems, and other hydraulic power generation systems; valves, cylinders, electronic controls, cockpit controls, electromechanical actuators, sensors, illuminated, and integrated displays and panels, and other controls and sensing products; and heavy-duty drum and disc brakes, clutches, and controllers for offshore oil and gas exploration, mining, and metal forming markets. In addition, the company offers agricultural mechanical transmissions; duty automated transmissions; clutches; transfer boxes, gearshift mechanisms, and rotors; and diesel-electric hybrid power systems for commercial vehicles and buses; and automotive products consisting of engine valves, cylinder heads, air and hydrogen management devices for fuel cells, electronically controlled traction modification devices, compressor control clutches for mobile refrigeration, on-board vapor recovery systems, fuel level senders, and turbocharger waste gate controls. The company was founded in 1916, currently employs just over 64,000 people and is headquartered in Cleveland, Ohio.
Eaton is diversified across several important industries with a diversified product line within those industries, making Eaton a good proxy on the economy. Driving earnings are Eaton’s 55% international exposure and extra strong strength in aerospace and agricultural equipment. Eaton a large company that supplies important aircraft parts to both Boeing and Airbus and has an attractive current valuation. Eaton in partnership with Hamilton Sundstrand recently won two contracts to supply electrical contactors and hydraulic pumps for the Boeing 787. From a valuation perspective, Eaton looks very attractive with a P/E Ratio of 12.84, a forward P/E Ratio of 9.53 and Price/Sales Ratio of 0.95. The 2.4% dividend yield is just above the average dividend yield of the S&P 500. The main cause for concern with Eaton is its leveraged balance sheet which carries $4.17B in short, current and long term debt when compared to just $2.36B in cash and short-term investments.
Looking at the company’s bookings, to give you a sense for kind of their ongoing activity, their Electrical segment bookings were up by some 3% this past quarter, and the company has been operating at very high levels in this business. Within the Electrical segment, it was a very big quarter as sales were up some 20%, 11 points of that coming from acquisitions, small contribution from ForEx the majority was then coming from end market growth as 7%. Operating profits were up 12.5%, compared to 11.3% last year. Hydraulics orders were up by some 6%, and the real answer there is that although it is a fairly flat condition here in the U.S., there is a much stronger condition outside of the U.S., and rest of the world. Meanwhile, the Aerospace orders were up a very strong 25% in the quarter, again, giving confirmation of the many new programs and activities and the building production levels in that arena for the firm. Eaton Corp faces competition from other diversified industrial conglomerates like Danaher (DHR), United Technologies (UTX), Emerson (EMR) and Parker-Hannifin (PH). If you were to consider just the aerospace division, competitors would include Moog Inc (MOGA), Woodward Governor Company (WGOV), Astronics Corporation (ATRO) and Crane Co (CR). For the future, Eaton has designed a hybrid electric powertrain that is currently used in some FedEx (FDX) delivery trucks and could gain widespread adoption in the future, and Eaton recently reported results that were better than analyst estimates and also raised guidance for 2008. With that, there is room for the company to continue its upward trend back to triple-digits.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Thursday, April 24, 2008
BetterTrades looks at F5 Networks Inc.
F5 Networks Inc., (FFIV) which makes software to run computer networks, made it known late Wednesday, after the close, that the company’s fiscal 2Q profits declined 11% on lower-than expected Japanese revenue. However, the profits met Wall Street predictions and F5 shares jumped $2.21, or 10%, to $24.40 in aftermarket trading, after rising $0.88, or 4.1%, to $22.19 in the regular session. For the quarter ending March 31st, F5 earned $17.7M, or $0.21 per share, compared with $20M, or $0.24 per share, for the same quarter in 2007. Excluding stock-based compensation, adjusted income in the latest quarter was $0.35 per share. Revenues for the quarter vaulted 35% to $159.1M from $127.6M in the year-ago period. Analysts polled had expected a profit of $0.21 per share on $156.2M in revenues. The analysts’ estimates included stock-based compensation figures. For the upcoming 3Q, F5 Networks now expects to post a quarterly profit of $0.21 to $0.22 per share, while analysts’ are expecting profits of $0.22 per share for the period. F5 also projected 3Q revenues of $160M to $162M, while analysts expect $161.4M in revenues. F5 also claimed that while it still expects its 3Q revenues to top its 2Q revenues of $159.1M, current economic weakness could slow the company's growth in the upcoming quarter. Shares of FFIV advanced on the day, up $1.38, or 6.2%, to close at $23.57.
F5 Networks, Inc. and its subsidiaries engage in marketing, selling, and servicing products that optimize the delivery of network-based applications, and availability of servers, data storage devices, and other network resources. Its products include BIG-IP products that comprise Global Traffic Management and Link Controller; FirePass appliances, which provide SSL VPN access for remote users of IP networks, and applications connected to those networks from various Web browser on any device; Application Security Manager, a Web application firewall that provides application-layer protection against generalized and targeted attacks; and WebAccelerator that speeds Web transactions by individual network object requests, connections, and end-to-end transactions from the browser through to databases. In addition, F5 Networks provides WANJet that combines WAN optimization and traffic-shaping in a single device to accelerate file transfers, email, data replication, and other applications over IP networks; Enterprise Manager, which allows customers to discover and view products in a single window, and to upgrade or modify the software; and ARX product family that comprise enterprise-class intelligent file virtualization devices, which dramatically simplify the management of file storage environments by automating data management tasks and eliminating the disruption associated with storage management operations. Further, it offers a range of services, such as consulting, training, installation, maintenance, and other technical support services. The company serves telecommunications, financial services, technology, manufacturing, transportation, and government sectors. F5 Networks markets its products and services through distributors, value-added resellers, and systems integrators. It has operations in the Americas, Europe, the Middle East, Africa, Japan, and the Asia Pacific. F5 Networks was founded in 1996, currently employs just over 1,600 workers and is headquartered in Seattle, Washington.
Instead of selling hardware boxes, F5 specializes in application-centric networking. F5 isn’t in the application business. Rather, the networking company focuses on making third-party applications, Microsoft Exchange Server, SharePoint, unified communications, etc., perform better over a network. More recently, F5 has expanded its product portfolio to enhance the performance of Microsoft Office Communications Server, Oracle and SAP applications. For its most recent quarter, F5’s product revenues of $112.1M represented 70% of all total revenue, while service revenues of $47M were 30% of all revenues. Globally, F5’s revenues were backed mainly by the Americas, which represented 55% of total revenue, while Europe, the Middle East, and Africa had another strong quarter accounting for 23% of revenue and Asia, the Pacific and China were at 13%. Also pertinent to the company’s revenue stream, F5 Networks is also the global leader in Application Delivery Networking with annual revenues over $400M in 2007. Its products enhance the delivery, optimization and security of application traffic on IP-based networks. It leads the Application Delivery Controller (ADC) market with a 38.3% market share and the advanced platform ADC sub-segment with a 61.2% share, a commendable job considering the fact that it is up against companies like Cisco Systems Inc. (CSCO), Juniper Networks Inc. (JNPR), Citrix Systems Inc. (CTXS), Foundry Networks Inc. (FDRY), and Nortel Networks Corp. (NT).
Financially, F5 Networks is a very business-sound company. The company’s gross margin for the past quarter was 77.6%, well above the industry’s average of 57.2%. Also, F5’s operating margins were 24.6%, while the industry average is a negative number. In addition to impressive margin figures, F5 completed the recent quarter with $450M in cash and investments on the company’s balance sheet. Cash flow from operations was $36.9M, and during the quarter, the company repurchased approximately 4.4 million shares of common stock for $100M. After a 2:1 stock split, issued in late August, 2007 the company continues a tendency to keep growing earnings at around 40%. With no debt, and nearly $5 a share in cash, the stock trades at 27 times 2008 earnings, a reasonably cheap valuation. In a note to investors, one Oppenheimer analyst publicized that he was impressed with F5's recent quarterly results, which he said defied "all expectations." At the same time, he reiterated his "Outperform" rating and $25 price target on the Seattle-company. Separately, a Banc of America Securities analyst reiterated his "Buy" rating, and said the company's next-quarter guidance seemed conservative. As it may appear to be the best time to enter a position for tech stocks, F5 is well positioned to move higher and higher in the coming future.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
F5 Networks, Inc. and its subsidiaries engage in marketing, selling, and servicing products that optimize the delivery of network-based applications, and availability of servers, data storage devices, and other network resources. Its products include BIG-IP products that comprise Global Traffic Management and Link Controller; FirePass appliances, which provide SSL VPN access for remote users of IP networks, and applications connected to those networks from various Web browser on any device; Application Security Manager, a Web application firewall that provides application-layer protection against generalized and targeted attacks; and WebAccelerator that speeds Web transactions by individual network object requests, connections, and end-to-end transactions from the browser through to databases. In addition, F5 Networks provides WANJet that combines WAN optimization and traffic-shaping in a single device to accelerate file transfers, email, data replication, and other applications over IP networks; Enterprise Manager, which allows customers to discover and view products in a single window, and to upgrade or modify the software; and ARX product family that comprise enterprise-class intelligent file virtualization devices, which dramatically simplify the management of file storage environments by automating data management tasks and eliminating the disruption associated with storage management operations. Further, it offers a range of services, such as consulting, training, installation, maintenance, and other technical support services. The company serves telecommunications, financial services, technology, manufacturing, transportation, and government sectors. F5 Networks markets its products and services through distributors, value-added resellers, and systems integrators. It has operations in the Americas, Europe, the Middle East, Africa, Japan, and the Asia Pacific. F5 Networks was founded in 1996, currently employs just over 1,600 workers and is headquartered in Seattle, Washington.
Instead of selling hardware boxes, F5 specializes in application-centric networking. F5 isn’t in the application business. Rather, the networking company focuses on making third-party applications, Microsoft Exchange Server, SharePoint, unified communications, etc., perform better over a network. More recently, F5 has expanded its product portfolio to enhance the performance of Microsoft Office Communications Server, Oracle and SAP applications. For its most recent quarter, F5’s product revenues of $112.1M represented 70% of all total revenue, while service revenues of $47M were 30% of all revenues. Globally, F5’s revenues were backed mainly by the Americas, which represented 55% of total revenue, while Europe, the Middle East, and Africa had another strong quarter accounting for 23% of revenue and Asia, the Pacific and China were at 13%. Also pertinent to the company’s revenue stream, F5 Networks is also the global leader in Application Delivery Networking with annual revenues over $400M in 2007. Its products enhance the delivery, optimization and security of application traffic on IP-based networks. It leads the Application Delivery Controller (ADC) market with a 38.3% market share and the advanced platform ADC sub-segment with a 61.2% share, a commendable job considering the fact that it is up against companies like Cisco Systems Inc. (CSCO), Juniper Networks Inc. (JNPR), Citrix Systems Inc. (CTXS), Foundry Networks Inc. (FDRY), and Nortel Networks Corp. (NT).
Financially, F5 Networks is a very business-sound company. The company’s gross margin for the past quarter was 77.6%, well above the industry’s average of 57.2%. Also, F5’s operating margins were 24.6%, while the industry average is a negative number. In addition to impressive margin figures, F5 completed the recent quarter with $450M in cash and investments on the company’s balance sheet. Cash flow from operations was $36.9M, and during the quarter, the company repurchased approximately 4.4 million shares of common stock for $100M. After a 2:1 stock split, issued in late August, 2007 the company continues a tendency to keep growing earnings at around 40%. With no debt, and nearly $5 a share in cash, the stock trades at 27 times 2008 earnings, a reasonably cheap valuation. In a note to investors, one Oppenheimer analyst publicized that he was impressed with F5's recent quarterly results, which he said defied "all expectations." At the same time, he reiterated his "Outperform" rating and $25 price target on the Seattle-company. Separately, a Banc of America Securities analyst reiterated his "Buy" rating, and said the company's next-quarter guidance seemed conservative. As it may appear to be the best time to enter a position for tech stocks, F5 is well positioned to move higher and higher in the coming future.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Wednesday, April 23, 2008
BetterTrades looks at Air Products & Chemicals Inc.
Industrial gas and materials supplier Air Products & Chemicals Inc. (APD) announced Wednesday that the company’s fiscal 2Q profits surged 38% as sales of tonnage and merchant gases jumped. Net income for the three months jumped to $314.3M, or $1.43 per share, compared with $227.6M, or $1.02 per share, in the year-earlier period. Excluding a gain of $0.28 per share from discontinued operations and a charge of $0.08 per share from a pension settlement, Air Products had adjusted earnings per share of $1.23. Analyst had expected, on average, earnings per share of $1.20. Revenues gained 13% to $2.61B, with analysts expecting revenues to come in at $2.59B. Sales of tonnage gases, which are hydrogen and oxygen marketed to petroleum refining, chemical and metallurgical customers, advanced 25%. Sales of merchant gases jumped 15 percent. Merchant gases refer to oxygen, nitrogen, argon, helium and hydrogen plus certain medical and specialty gases shipped in tankers, tube trailers, cylinders or provided on-site via generators. The company now expects 2008 profits to be above Wall Street estimates and fiscal 3Q profits to increase 12% to 16%. Air Products also expects 2008 earnings of $4.95 per share to $5.05 per share, based on its strong first-half performance, growing backlog of new investments and improving margins. Air Products said it also expects 2008 earnings of $4.95 per share to $5.05 per share, based on its strong first-half performance, growing backlog of new investments and improving margins. The company projected earnings per share for the 3Q ending in June of $1.25 to $1.30. Analysts expect 3Q earnings of $1.28 per share. Shares of APD declined $3.74, or 3.7%, to $97.19 in Wednesday’s trading.
Air Products and Chemicals, Inc. offers atmospheric gases, process and specialty gases, performance materials, and equipment and services worldwide. Its Merchant Gases segment sells industrial gases, such as oxygen, nitrogen, and argon; hydrogen and helium; and certain medical and specialty gases for metal, glass, chemical, food, medical, steel, general manufacturing, and petroleum and natural gas industries. The company's Tonnage Gases segment provides hydrogen, carbon monoxide, nitrogen, oxygen, and syngas to the petroleum refining, chemical, and metallurgical industries. Its Electronics and Performance Materials segment offers specialty gases, such as nitrogen trifluoride, silane, arsine, phosphine, white ammonia, silicon tetrafluoride, carbon tetrafluoride, hexafluoromethane, and tungsten hexafluoride, as well as tonnage gases, specialty and bulk chemicals, and services and equipment for the manufacture of silicon and compound semiconductors, thin film transistor liquid crystal displays, and photovoltaic devices. The company's Equipment and Energy segment manufactures cryogenic and gas processing equipment for air separation, hydrocarbon recovery and purification, natural gas liquefaction, and helium distribution, as well as offers plant design, engineering, procurement, and construction management services for the chemical and petrochemical manufacturing, oil and gas recovery and processing, and steel and primary metals processing industries. Air Products and Chemicals' Healthcare segment provides respiratory therapies, home medical equipment, and infusion services to patients in their homes. Its Chemicals segment produces polymer emulsions used in adhesives, non-woven fabric binders, paper coatings, paints, inks, and carpet backing binder formulations, as well as di-nitrotoluene for use as an intermediate in the manufacture of precursor of flexible polyurethane foam. The company was founded in 1940, currently employs just over 21,000 workers and is headquartered in Trexlertown, Pennsylvania.
As a major component of the S&P 500 index, Air Products and Chemicals, Inc. offers atmospheric gases, process and specialty gases, performance materials, and equipment and services worldwide. The company has become a huge draw for investors as the firm has been increasing its dividends for the past 26 consecutive years. From 1998 up until 2007 this dividend growth stock has delivered an annual average total return of 11.30 % to its shareholders. At the same time company has managed to deliver a 7.30% average annual increase in its EPS since 1998. Annual dividend payments have increased over the past 10 years by an average of 10% annually, which is higher than the growth in EPS. A 10% growth in dividends translates into the dividend payment doubling almost every 7 years. If you look at historical data, going as far back as 1985, APD has actually managed to double its dividend payment every seven years on average. In addition to a strong dividend yield, the company’s Return on Equity (ROE) has remained in the 10% to 20% range over the past 10 years with the exception of the 2000 numbers which were below 5%. Currently the company’s ROE is at 20%
While rising prices at the pump have kept us distracted, another gas shortage has crept up on us, a worldwide helium crunch. Within the markets, APD is one of the strongest players in the helium business out there. In fact, Air Products is the world's largest helium supplier with 55% of its business being in the overseas markets, along with being a huge supplier of argon, another gas in tight demand. By far, the U.S. is the world's leading helium producer; in 2005, the U.S. produced 83% of the helium extracted that year. We're also its largest consumer; in 2007 the U.S. alone ate up approximately 2.5 billion cubic feet of helium. The other arena that APD excels in is that of fuel cells. A fuel cell is an electrochemical energy conversion device which produces electricity from external supplies of fuel and an oxidant. They can operate continuously, as long as the flow continues between the fuel and the oxidant. The most common type of fuel cell is the hydrogen fuel cell, which uses hydrogen as fuel and oxygen as oxidant. The company has developed and continues to operate a hydrogen production facility, a fuel cell power plant and a fueling station which dispenses hydrogen and hydrogen blended fuels to a fleet of light duty vehicles in Las Vegas. They also supply Honda Motor Company with high pressure gas and two hydrogen fueling stations for their Fuel Cell Vehicle Program with the city of Los Angeles. APD offers investors a great growth story, with more upside exposure to the so-called hydrogen economy than any other U.S. company. The stock has a P/E Ratio of 20, and is one of the few fuel cell related stocks that pays a dividend, generating a yield of 1.7%.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Air Products and Chemicals, Inc. offers atmospheric gases, process and specialty gases, performance materials, and equipment and services worldwide. Its Merchant Gases segment sells industrial gases, such as oxygen, nitrogen, and argon; hydrogen and helium; and certain medical and specialty gases for metal, glass, chemical, food, medical, steel, general manufacturing, and petroleum and natural gas industries. The company's Tonnage Gases segment provides hydrogen, carbon monoxide, nitrogen, oxygen, and syngas to the petroleum refining, chemical, and metallurgical industries. Its Electronics and Performance Materials segment offers specialty gases, such as nitrogen trifluoride, silane, arsine, phosphine, white ammonia, silicon tetrafluoride, carbon tetrafluoride, hexafluoromethane, and tungsten hexafluoride, as well as tonnage gases, specialty and bulk chemicals, and services and equipment for the manufacture of silicon and compound semiconductors, thin film transistor liquid crystal displays, and photovoltaic devices. The company's Equipment and Energy segment manufactures cryogenic and gas processing equipment for air separation, hydrocarbon recovery and purification, natural gas liquefaction, and helium distribution, as well as offers plant design, engineering, procurement, and construction management services for the chemical and petrochemical manufacturing, oil and gas recovery and processing, and steel and primary metals processing industries. Air Products and Chemicals' Healthcare segment provides respiratory therapies, home medical equipment, and infusion services to patients in their homes. Its Chemicals segment produces polymer emulsions used in adhesives, non-woven fabric binders, paper coatings, paints, inks, and carpet backing binder formulations, as well as di-nitrotoluene for use as an intermediate in the manufacture of precursor of flexible polyurethane foam. The company was founded in 1940, currently employs just over 21,000 workers and is headquartered in Trexlertown, Pennsylvania.
As a major component of the S&P 500 index, Air Products and Chemicals, Inc. offers atmospheric gases, process and specialty gases, performance materials, and equipment and services worldwide. The company has become a huge draw for investors as the firm has been increasing its dividends for the past 26 consecutive years. From 1998 up until 2007 this dividend growth stock has delivered an annual average total return of 11.30 % to its shareholders. At the same time company has managed to deliver a 7.30% average annual increase in its EPS since 1998. Annual dividend payments have increased over the past 10 years by an average of 10% annually, which is higher than the growth in EPS. A 10% growth in dividends translates into the dividend payment doubling almost every 7 years. If you look at historical data, going as far back as 1985, APD has actually managed to double its dividend payment every seven years on average. In addition to a strong dividend yield, the company’s Return on Equity (ROE) has remained in the 10% to 20% range over the past 10 years with the exception of the 2000 numbers which were below 5%. Currently the company’s ROE is at 20%
While rising prices at the pump have kept us distracted, another gas shortage has crept up on us, a worldwide helium crunch. Within the markets, APD is one of the strongest players in the helium business out there. In fact, Air Products is the world's largest helium supplier with 55% of its business being in the overseas markets, along with being a huge supplier of argon, another gas in tight demand. By far, the U.S. is the world's leading helium producer; in 2005, the U.S. produced 83% of the helium extracted that year. We're also its largest consumer; in 2007 the U.S. alone ate up approximately 2.5 billion cubic feet of helium. The other arena that APD excels in is that of fuel cells. A fuel cell is an electrochemical energy conversion device which produces electricity from external supplies of fuel and an oxidant. They can operate continuously, as long as the flow continues between the fuel and the oxidant. The most common type of fuel cell is the hydrogen fuel cell, which uses hydrogen as fuel and oxygen as oxidant. The company has developed and continues to operate a hydrogen production facility, a fuel cell power plant and a fueling station which dispenses hydrogen and hydrogen blended fuels to a fleet of light duty vehicles in Las Vegas. They also supply Honda Motor Company with high pressure gas and two hydrogen fueling stations for their Fuel Cell Vehicle Program with the city of Los Angeles. APD offers investors a great growth story, with more upside exposure to the so-called hydrogen economy than any other U.S. company. The stock has a P/E Ratio of 20, and is one of the few fuel cell related stocks that pays a dividend, generating a yield of 1.7%.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Tuesday, April 22, 2008
BetterTrades looks at AT&T Inc.
AT&T Inc.'s (T) 1Q earnings jumped 22% as its wireless division saw continued strong growth and the enterprise services division reversed a slide, the company announced early Tuesday morning. The country's largest telecommunications company earned $3.46B, or $0.57 per share, compared with $2.85B, or $0.45 per share, a year ago. Excluding certain items, AT&T earned $0.74 per share, up from $0.65 per share a year ago. Revenues for the company increased 6.1% to $30.7B. The earnings per share and revenues each matched the average expectation of analysts. However, earnings were reduced by $0.13 per share by merger-related costs and by $0.04 by severance costs. The company stated last week that it plans to cut about 4,600 jobs, or 1.5% of its work force, to shift resources from the traditional phone operations to growing parts of its business, like wireless. AT&T lost 5 million local phone lines in the last year, to finish out the quarter with 60.4 million. That's a trend that's affecting all phone companies, as customers switch to using wireless or cable services. However, AT&T said a run-up in its video services and broadband more than offset the falloff in revenues from voice customers. It added 491,000 broadband customers in the quarter, for a total of 14.6 million, and numerous customers for its U-verse video service, which is delivered over phone lines. The wireless division added a net 1.3 million subscribers, for a total of 71.4 million, even though it lost 330,000 subscribers due to the shutdown of an older network. Revenues for these divisions were $11.8B, up 18.3% from a year earlier. During the quarter, AT&T spent $6.64B for spectrum licenses it will use to expand its broadband services. In today’s trading, AT&T shares were at $37.81, up $0.22, or 0.6% from Monday's close.
AT&T, Inc. provides telecommunications services to consumers and businesses in the United States and internationally. It provides wireless services, including local wireless communications, long-distance, and roaming services with various postpaid and prepaid service plans. The company also supplies various handsets and personal computer wireless data cards, as well as accessories comprising carrying cases, hands-free devices, batteries, battery chargers, and other items. AT&T's wireline services comprise voice services comprising local and long-distance services, integrated network connections, traditional long distance and international long distance, calling card, 1-800 services, conference calling, and wholesale switched access service, as well as calling features, such as caller id, call waiting, and voice mail. Its wireline data services consist of switched and dedicated transport, Internet access and network integration, and data equipment; high-speed connections comprising private lines, packet, dedicated Internet, and enterprise networking services, as well as products, such as DSL/broadband, dial-up Internet access, and WiFi; businesses voice applications over IP-based networks; and local, interstate, and international wholesale networking capacity to other service providers. The company's other wireline services include managed Web hosting, application management, security service, integration services, customer premises equipment, outsourcing, directory and operator assistance services, government-related services, and U-verse and satellite video services. In addition, it publishes Yellow and White Pages directories; sells directory and Internet-based advertising; and provides multi-enterprise collaboration services to businesses. The company was founded in 1983. It was formerly known as SBC Communications, Inc. and changed its name to AT&T, Inc. in 2005. The company is based in San Antonio, Texas and currently employs nearly 310, 000 workers.
When it comes to content distribution, media and tech companies have been focused on giving consumers what they want, when and where they want it. Now the big buzz word is interactivity. So much of the technology here at NAB sends data both ways to the consumers, and back to broadcasters and advertisers. Interactivity allows advertising to reflect what viewers are watching, enabling much more targeted advertising. And interactivity allows for a whole new social element, chat and the sharing of TV clips, making sitting alone in your living room as social as spending the afternoon with your nearest and dearest pals. AT&T's U-Verse is the only pure Internet Protocol TV available in the U.S. Because U-Verse only sends the consumer exactly what he or she wants, instead of taking up bandwidth with every single option, the idea is that you can offer a lot more options, at very high resolution. The U-Verse TV service ended the quarter with 379,000 subscribers. U-Verse gained 148,000 subscribers and AT&T reiterated that while the company adds 12,000 subscribers a week, it expects to have 1 million subscribers by the end of the year. The U-verse, however, won’t come cheap as AT&T expects the increase in deployment to take $0.12 a share to $0.14 a share chunk out of 2008 earnings.
AT&T’s decision to aggressively push its third generation (3G) wireless services in 2008 is further proof that U.S. mobile operators are now banking on growing demand for wireless broadband to overcome slumping/stagnating voice revenues. AT&T plans to expand its network to another 80 cities this year, bringing the total number of markets on their 3G network to 350 cities. But AT&T is facing some serious competition from Sprint (S) and Verizon (VZ), whose offerings have become popular with the road warriors, making it tough for AT&T to become a major player in the 3G market. Overall, AT&T’s outlook is positive for 2008. AT&T projects wireless revenue growth to be in the mid-teens, while having positive enterprise revenues. Revenue growth overall will be in the mid-single digit range with earnings per share growing at a double digit clip. AT&T has also upped its dividend by 12.7% from $0.35 a share to $0.40 a share quarterly. The company is also buying back 400 million shares which should help the price of the stock move forward. Clearly they believe their stocks undervalued, which is great for investor confidence. Longer term, AT&T projected revenues from Yellowpages.com and content advertising to hit $1.5B in 2010, up from $600M in 2007. Meanwhile, AT&T expects cost savings from the AT&T-BellSouth merger to double over the next three years to $7B.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
AT&T, Inc. provides telecommunications services to consumers and businesses in the United States and internationally. It provides wireless services, including local wireless communications, long-distance, and roaming services with various postpaid and prepaid service plans. The company also supplies various handsets and personal computer wireless data cards, as well as accessories comprising carrying cases, hands-free devices, batteries, battery chargers, and other items. AT&T's wireline services comprise voice services comprising local and long-distance services, integrated network connections, traditional long distance and international long distance, calling card, 1-800 services, conference calling, and wholesale switched access service, as well as calling features, such as caller id, call waiting, and voice mail. Its wireline data services consist of switched and dedicated transport, Internet access and network integration, and data equipment; high-speed connections comprising private lines, packet, dedicated Internet, and enterprise networking services, as well as products, such as DSL/broadband, dial-up Internet access, and WiFi; businesses voice applications over IP-based networks; and local, interstate, and international wholesale networking capacity to other service providers. The company's other wireline services include managed Web hosting, application management, security service, integration services, customer premises equipment, outsourcing, directory and operator assistance services, government-related services, and U-verse and satellite video services. In addition, it publishes Yellow and White Pages directories; sells directory and Internet-based advertising; and provides multi-enterprise collaboration services to businesses. The company was founded in 1983. It was formerly known as SBC Communications, Inc. and changed its name to AT&T, Inc. in 2005. The company is based in San Antonio, Texas and currently employs nearly 310, 000 workers.
When it comes to content distribution, media and tech companies have been focused on giving consumers what they want, when and where they want it. Now the big buzz word is interactivity. So much of the technology here at NAB sends data both ways to the consumers, and back to broadcasters and advertisers. Interactivity allows advertising to reflect what viewers are watching, enabling much more targeted advertising. And interactivity allows for a whole new social element, chat and the sharing of TV clips, making sitting alone in your living room as social as spending the afternoon with your nearest and dearest pals. AT&T's U-Verse is the only pure Internet Protocol TV available in the U.S. Because U-Verse only sends the consumer exactly what he or she wants, instead of taking up bandwidth with every single option, the idea is that you can offer a lot more options, at very high resolution. The U-Verse TV service ended the quarter with 379,000 subscribers. U-Verse gained 148,000 subscribers and AT&T reiterated that while the company adds 12,000 subscribers a week, it expects to have 1 million subscribers by the end of the year. The U-verse, however, won’t come cheap as AT&T expects the increase in deployment to take $0.12 a share to $0.14 a share chunk out of 2008 earnings.
AT&T’s decision to aggressively push its third generation (3G) wireless services in 2008 is further proof that U.S. mobile operators are now banking on growing demand for wireless broadband to overcome slumping/stagnating voice revenues. AT&T plans to expand its network to another 80 cities this year, bringing the total number of markets on their 3G network to 350 cities. But AT&T is facing some serious competition from Sprint (S) and Verizon (VZ), whose offerings have become popular with the road warriors, making it tough for AT&T to become a major player in the 3G market. Overall, AT&T’s outlook is positive for 2008. AT&T projects wireless revenue growth to be in the mid-teens, while having positive enterprise revenues. Revenue growth overall will be in the mid-single digit range with earnings per share growing at a double digit clip. AT&T has also upped its dividend by 12.7% from $0.35 a share to $0.40 a share quarterly. The company is also buying back 400 million shares which should help the price of the stock move forward. Clearly they believe their stocks undervalued, which is great for investor confidence. Longer term, AT&T projected revenues from Yellowpages.com and content advertising to hit $1.5B in 2010, up from $600M in 2007. Meanwhile, AT&T expects cost savings from the AT&T-BellSouth merger to double over the next three years to $7B.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Monday, April 21, 2008
BetterTrades looks at Cal-Maine Foods Inc.
Shareholders of Cal-Maine Foods Inc. (CALM) will enjoy much more than a fresh egg from their company. The largest American egg company has commenced a new variable-rate dividend policy and, thanks to soaring demand for its high-priced products, will issue a protein-packed increase in its next quarterly payout. The company announced recently that they will distribute a third of its net income to investors as dividends each quarter. For its 3Q, which ended March 1st, 2008, the company will pay $0.807 per share to common stock holders. That's up from $0.013 cents in the year-earlier quarter. During the company’s recent earnings report, the Jackson, Mississippi-based company posted profits of $57.2M, or $2.41 per share on sales of $278.0M for the quarter. That's a 228.7% increase from net income of $17.4M, or $0.74 per share on $175.2M sales in the year-prior quarter. For the company, profits are up, but the cost of production is becoming an issue. As a result of the ethanol boom the rising cost of feed for chickens has driven up the cost of eggs. Thus, the increasing cost of grain is a major concern to egg farmers and they worry about having sufficient supply of feed, and the costs they'll have to incur to feed their livestock. In response to higher costs, producers must pass those costs down. On average, consumers paid $1.37 for a dozen eggs this month, up 40.4% compared to $0.976 a dozen in April 2007.
Cal-Maine Foods, Inc., incorporated in 1963, is the producer and marketer of shell eggs in the United States. The Company's primary business is the production, grading, packaging, marketing and distribution of shell eggs. The Company is also the producer and marketer of specialty shell eggs in the United States. Specialty shell eggs include reduced cholesterol, cage free and organic eggs. During the fiscal year ending June 2007, specialty shell eggs represented approximately 15% of the Company's shell egg dollar sales. The Company produces, markets, and distributes private label specialty shell eggs to several customers. On January 24th, 2007, the Company purchased the remaining 50% of interest in Green Forest Foods, LLC. In April of 2007, through its 90% owned subsidiary, Benton County Foods, LLC, the Company acquired the assets and business of the shell egg division of George's, Inc., located near Siloam Springs, Arkansas. Cal-Maine Farms, Inc. is a subsidiary of the Company. In fiscal 2007, shell eggs accounted for approximately 96% of the Company's net sales. Egg products accounted for approximately 2% of its net sales, in fiscal 2007. The Company has a total flock of approximately 23 million layers and 5 million pullets and breeders. Layers are mature female chickens, pullets are young female chickens usually under 20 weeks of age, and breeders are male or female chickens used to produce fertile eggs to be hatched for egg production flocks. The Company sells shell eggs in 29 states, primarily in the Southwestern, Southeastern, Mid-Western and Mid-Atlantic regions of the United States. It markets the shell eggs through its extensive distribution network of customers, including national and regional grocery store chains, club stores, foodservice distributors and egg product manufacturers. The Company markets its specialty shell eggs under two brands: Egg-Land's Best and Farmhouse. It owns a 25.9% equity interest in Egg-Land's Best, Inc. It markets cage free eggs under its Farmhouse brand and distributes those shell eggs across the Southeast and Southwest regions of the United States.
Cal-Maine Foods, which is coming off of its record high of $40.75 in late-March, is involved in a highly cyclical commodity business. Since the fall, egg prices have remained at or very near record highs, as has been observed at local grocery stores. Typically there is a highly seasonal fluctuation in egg prices, that being higher in fall/winter and lower in spring/summer. Historically, the typical response to higher prices is to increase production, which triggers a drop in prices and profits. Falling supply contributes to high prices as well. Industry-established animal welfare guidelines have reduced the number of birds per cage by 30% since 2002 but demand has not decreased. Supply remains low, however, and fresh shell eggs are just one part of the consumer egg market. The egg-breaking sector must also work to build its inventory. These egg processors will break eggs to make liquid, frozen and dried egg products used in cake mixes and baking products, prepared and packaged foods, and other food services. The number of chickens in this industry is a good indicator of supply. Dried egg inventory also tells how much stock exists for the baking industry and is also an important indicator for the industry. One year ago there was 20.4 million pounds of eggs in the dried egg inventory. In the last 12 months that number dropped 52.5% to 9.7 million pounds.
Because egg prices have stayed high for so long, CALM will in all likelihood post record earnings for the current quarter, which will be reported in late-July. In fact, gross margins in the 1Q of 2008 were 37%, while in the 2Q of 2007, gross margins were 24%. After a huge run-up of late, the company has a market valuation of nearly $700M. Cal-Maine had a huge 1Q this year, and turned more in profits that quarter than it did all of last year combined. This gives the stock a very low P/E Ratio, about 5x earnings, and its profitability ratios, i.e. Return on Equity (ROE), 69%, and Return on Assets (ROA), 29%, that look extremely attractive. Financially, Cal-Maine is relatively strong. Trailing twelve month (ttm) coverage ratio is over 20, and debt-to-equity is about 0.5, which is not great but not bad either. The company sports a 56% trailing return on tangible capital, and their free cash flow is about 13% of revenues (ttm). On the surface, the valuation looks like an absolute steal for a company that is best-in-class in a reliable industry. But eggs are an extremely cyclical commodity, and Cal-Maine’s revenues are almost totally dependent on the wholesale egg price. The other thing is that Cal-Maine is only 2 years removed from 2 straight years of net losses as egg prices were almost half of what they are today. So, if we are in the middle of a great supply/demand situation for egg farmers that will hold into the future, Cal-Maine will continue to be highly profitable.
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Cal-Maine Foods, Inc., incorporated in 1963, is the producer and marketer of shell eggs in the United States. The Company's primary business is the production, grading, packaging, marketing and distribution of shell eggs. The Company is also the producer and marketer of specialty shell eggs in the United States. Specialty shell eggs include reduced cholesterol, cage free and organic eggs. During the fiscal year ending June 2007, specialty shell eggs represented approximately 15% of the Company's shell egg dollar sales. The Company produces, markets, and distributes private label specialty shell eggs to several customers. On January 24th, 2007, the Company purchased the remaining 50% of interest in Green Forest Foods, LLC. In April of 2007, through its 90% owned subsidiary, Benton County Foods, LLC, the Company acquired the assets and business of the shell egg division of George's, Inc., located near Siloam Springs, Arkansas. Cal-Maine Farms, Inc. is a subsidiary of the Company. In fiscal 2007, shell eggs accounted for approximately 96% of the Company's net sales. Egg products accounted for approximately 2% of its net sales, in fiscal 2007. The Company has a total flock of approximately 23 million layers and 5 million pullets and breeders. Layers are mature female chickens, pullets are young female chickens usually under 20 weeks of age, and breeders are male or female chickens used to produce fertile eggs to be hatched for egg production flocks. The Company sells shell eggs in 29 states, primarily in the Southwestern, Southeastern, Mid-Western and Mid-Atlantic regions of the United States. It markets the shell eggs through its extensive distribution network of customers, including national and regional grocery store chains, club stores, foodservice distributors and egg product manufacturers. The Company markets its specialty shell eggs under two brands: Egg-Land's Best and Farmhouse. It owns a 25.9% equity interest in Egg-Land's Best, Inc. It markets cage free eggs under its Farmhouse brand and distributes those shell eggs across the Southeast and Southwest regions of the United States.
Cal-Maine Foods, which is coming off of its record high of $40.75 in late-March, is involved in a highly cyclical commodity business. Since the fall, egg prices have remained at or very near record highs, as has been observed at local grocery stores. Typically there is a highly seasonal fluctuation in egg prices, that being higher in fall/winter and lower in spring/summer. Historically, the typical response to higher prices is to increase production, which triggers a drop in prices and profits. Falling supply contributes to high prices as well. Industry-established animal welfare guidelines have reduced the number of birds per cage by 30% since 2002 but demand has not decreased. Supply remains low, however, and fresh shell eggs are just one part of the consumer egg market. The egg-breaking sector must also work to build its inventory. These egg processors will break eggs to make liquid, frozen and dried egg products used in cake mixes and baking products, prepared and packaged foods, and other food services. The number of chickens in this industry is a good indicator of supply. Dried egg inventory also tells how much stock exists for the baking industry and is also an important indicator for the industry. One year ago there was 20.4 million pounds of eggs in the dried egg inventory. In the last 12 months that number dropped 52.5% to 9.7 million pounds.
Because egg prices have stayed high for so long, CALM will in all likelihood post record earnings for the current quarter, which will be reported in late-July. In fact, gross margins in the 1Q of 2008 were 37%, while in the 2Q of 2007, gross margins were 24%. After a huge run-up of late, the company has a market valuation of nearly $700M. Cal-Maine had a huge 1Q this year, and turned more in profits that quarter than it did all of last year combined. This gives the stock a very low P/E Ratio, about 5x earnings, and its profitability ratios, i.e. Return on Equity (ROE), 69%, and Return on Assets (ROA), 29%, that look extremely attractive. Financially, Cal-Maine is relatively strong. Trailing twelve month (ttm) coverage ratio is over 20, and debt-to-equity is about 0.5, which is not great but not bad either. The company sports a 56% trailing return on tangible capital, and their free cash flow is about 13% of revenues (ttm). On the surface, the valuation looks like an absolute steal for a company that is best-in-class in a reliable industry. But eggs are an extremely cyclical commodity, and Cal-Maine’s revenues are almost totally dependent on the wholesale egg price. The other thing is that Cal-Maine is only 2 years removed from 2 straight years of net losses as egg prices were almost half of what they are today. So, if we are in the middle of a great supply/demand situation for egg farmers that will hold into the future, Cal-Maine will continue to be highly profitable.
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Friday, April 18, 2008
BetterTrades looks at Electronic Arts Inc.
Video game designer Electronic Arts Inc. (ERTS) announced Friday it is extending its offer to buy all shares of Grand Theft Auto maker Take-Two Interactive Software Inc. (TTWO) a month and reducing its offer. Electronic Arts is extending the offer to midday on May 16th from Friday and is cutting the offering price to $25.74 from $26 to reflect stock grants to Take-Two's management. Shareholders of Take-Two passed a proposal Thursday to grant ZelnickMedia, the company's management, 1.5 million shares of restricted stock. Redwood City, Calif.-based Electronic Arts, which launched its $2B tender offer to buy Take-Two in February, strongly objected to the stock grant and said it did not reflect the views of shareholders. Take-Two allowed shareholders of record as of Feb. 19th to vote at the meeting. That was five days before EA's offer went public, and more than half of Take-Two's shares have since changed hands. As for Take-Two, the company is fighting the acquisition talks until the latest in its blockbuster Grand Theft Auto (GTA) franchise comes out on April 29th. Take-Two Interactive shares closed Friday at $25.98, while shares of ERTS closed at $52.01.
Electronic Arts Inc., incorporated in 1982, develops, markets, publishes and distributes interactive software games (titles) that are playable by consumers on devices, such as in-home video game players, such as the Sony PlayStation 2 and 3, Microsoft Xbox and Xbox 360 and Nintendo GameCube (consoles); personal computers (PCs); mobile platforms, including handheld video game players (such as the PlayStation Portable (PSP), Nintendo DS and Game Boy Advance) and cellular handsets, and online, over the Internet and other online networks. The Company publishes interactive software games for multiple platforms. It makes investments in facilities and equipment that allow the Company to create and edit video and audio recordings that are used in its games. In January 2008, Electronic Arts completed the acquisition of VG Holding Corp. In August 2006, the Company acquired Phenomic Game Development. In October 2006, Electronic Arts completed the acquisition of Digital Illusions CE (DICE), development team and creators of the Battlefield game franchise. On July 24, 2006, it acquired Mythic Entertainment, Inc. In October 2007, the Company announced the acquisition of Super Computer International (SCI), a provider of gaming client applications and software tools for the PC. Electronic Arts develops games internally at its development and production studios located near San Francisco, Los Angeles, Orlando, Chicago, Vancouver, Montreal, London, Sweden, Tokyo and Shanghai. The Company also engages third parties to develop games on its behalf at their own development and production studios. Through its EA Partners business unit, Electronic Arts teams with other game development companies to assist them to develop their own interactive software games, which the Company then publish, market and distribute. The Company refers to these types of arrangements as co-publishing. Electronic Arts also maintains a smaller business where it licenses to manufacturers of products in related industries (for example, makers of personal computers or computer accessories) rights to include certain of its products with the manufacturer's product or offer the Company' products to consumers who have purchased the manufacturer's product. The Company calls these combined products OEM bundles. Headquartered in Redwood City, California, Electronic Arts currently employs nearly 8,000 workers.
In a bad economy, people envelop themselves and they stay home and they watch TV, they rent movies, and they play video games. Electronic Arts is the king of video game makers and they have a variety of platforms to choose from, Playstation (SNE), XBOX 360 (MSFT), the Wii, and of course PC and MAC (AAPL). Meanwhile, Electronic Arts makes games for all of them. EA has a built an annuity with its sports franchise games, and every year they release an update, with new features and most importantly updated rosters. People who play sports games have to buy the update. The next big catalyst for game makers will be the mobile sector. Mobile gaming will be huge. People want to play while waiting at the doctors’ office, at the airport, in line at unemployment. Now, there are the 200-plus million people who play online casual games every month, and as gaming and social networking slowly converge we are seeing more games played more often on the big social networking sites. Overall, total sales, including hardware, software and accessories, jumped 34% versus a year ago, hitting $1.33B for the month of March. The number was also up month to month besting the $1.18B in total sales registered in February. And according to a recent forecast, spending in the gaming sector is poised to increase 133% over the next 5 years, through 2012. In February alone, U.S. sales for EA were up 109%, driven by the huge success of their Rock Band game, and without that game, sales still were up 25% for the month.
Take-Two hopes the release of the new GTA game will boost the company's stock price, justifying its advice to shareholders to reject Electronic Arts' $26-per-share bid, initially a 64% premium to the company's stock. The fourth in the series received rave reviews and is set to break records and bring in $400M dollars in its first week of sales. That won't only be the biggest video game debut ever it'll also likely be the biggest opening week for any entertainment product. So why does EA want Take-Two so bad? Well, Take Two and EA are the only two companies that make sports-related video games. From a competitive perspective, EA doesn't want a rival that might invest more in those sports games to snag Take Two and the licenses it has nailed down. Management detailed some pretty bullish revenue and operating income targets to be attained by 2011, which are achievable given market opportunities, EA’s industry positioning, and internal operating factors. The company plans to reach net sales of $6.0B and operating margins of 25%, fueled by a mix of improved execution on franchise titles, contribution from new intellectual properties, and a significant boost from digital content. The current estimates by analysts are for $4.9B in total revenues for fiscal 2011.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Electronic Arts Inc., incorporated in 1982, develops, markets, publishes and distributes interactive software games (titles) that are playable by consumers on devices, such as in-home video game players, such as the Sony PlayStation 2 and 3, Microsoft Xbox and Xbox 360 and Nintendo GameCube (consoles); personal computers (PCs); mobile platforms, including handheld video game players (such as the PlayStation Portable (PSP), Nintendo DS and Game Boy Advance) and cellular handsets, and online, over the Internet and other online networks. The Company publishes interactive software games for multiple platforms. It makes investments in facilities and equipment that allow the Company to create and edit video and audio recordings that are used in its games. In January 2008, Electronic Arts completed the acquisition of VG Holding Corp. In August 2006, the Company acquired Phenomic Game Development. In October 2006, Electronic Arts completed the acquisition of Digital Illusions CE (DICE), development team and creators of the Battlefield game franchise. On July 24, 2006, it acquired Mythic Entertainment, Inc. In October 2007, the Company announced the acquisition of Super Computer International (SCI), a provider of gaming client applications and software tools for the PC. Electronic Arts develops games internally at its development and production studios located near San Francisco, Los Angeles, Orlando, Chicago, Vancouver, Montreal, London, Sweden, Tokyo and Shanghai. The Company also engages third parties to develop games on its behalf at their own development and production studios. Through its EA Partners business unit, Electronic Arts teams with other game development companies to assist them to develop their own interactive software games, which the Company then publish, market and distribute. The Company refers to these types of arrangements as co-publishing. Electronic Arts also maintains a smaller business where it licenses to manufacturers of products in related industries (for example, makers of personal computers or computer accessories) rights to include certain of its products with the manufacturer's product or offer the Company' products to consumers who have purchased the manufacturer's product. The Company calls these combined products OEM bundles. Headquartered in Redwood City, California, Electronic Arts currently employs nearly 8,000 workers.
In a bad economy, people envelop themselves and they stay home and they watch TV, they rent movies, and they play video games. Electronic Arts is the king of video game makers and they have a variety of platforms to choose from, Playstation (SNE), XBOX 360 (MSFT), the Wii, and of course PC and MAC (AAPL). Meanwhile, Electronic Arts makes games for all of them. EA has a built an annuity with its sports franchise games, and every year they release an update, with new features and most importantly updated rosters. People who play sports games have to buy the update. The next big catalyst for game makers will be the mobile sector. Mobile gaming will be huge. People want to play while waiting at the doctors’ office, at the airport, in line at unemployment. Now, there are the 200-plus million people who play online casual games every month, and as gaming and social networking slowly converge we are seeing more games played more often on the big social networking sites. Overall, total sales, including hardware, software and accessories, jumped 34% versus a year ago, hitting $1.33B for the month of March. The number was also up month to month besting the $1.18B in total sales registered in February. And according to a recent forecast, spending in the gaming sector is poised to increase 133% over the next 5 years, through 2012. In February alone, U.S. sales for EA were up 109%, driven by the huge success of their Rock Band game, and without that game, sales still were up 25% for the month.
Take-Two hopes the release of the new GTA game will boost the company's stock price, justifying its advice to shareholders to reject Electronic Arts' $26-per-share bid, initially a 64% premium to the company's stock. The fourth in the series received rave reviews and is set to break records and bring in $400M dollars in its first week of sales. That won't only be the biggest video game debut ever it'll also likely be the biggest opening week for any entertainment product. So why does EA want Take-Two so bad? Well, Take Two and EA are the only two companies that make sports-related video games. From a competitive perspective, EA doesn't want a rival that might invest more in those sports games to snag Take Two and the licenses it has nailed down. Management detailed some pretty bullish revenue and operating income targets to be attained by 2011, which are achievable given market opportunities, EA’s industry positioning, and internal operating factors. The company plans to reach net sales of $6.0B and operating margins of 25%, fueled by a mix of improved execution on franchise titles, contribution from new intellectual properties, and a significant boost from digital content. The current estimates by analysts are for $4.9B in total revenues for fiscal 2011.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Thursday, April 17, 2008
BetterTrades looks at Meridian Bioscience Inc.
Meridian Bioscience Inc.'s (VIVO) profits jumped 24% in the fiscal 2Q on strong sales of products diagnosing influenza and other respiratory infections, the biotechnology company announced early Thursday morning. Meridian Bioscience earned $7.3M, or $0.18 per share, in the 2Q, compared with profits of $5.9M, or $0.15 per share, in the 2Q last year. Analysts polled, had forecasted profits of $0.19 per share. Meanwhile, sales jumped 13% to $36.2M from $32.1M, while analysts had expected sales of $37M. Revenues were impacted by a slower quarter in its life science business unit, which saw operating profits fall to $352,000 from $863,000 in the year-ago quarter, while net sales dropped to $5.4M from $6M. Lower demand from a major customer and a delay in a product shipment affected that segment, along with a product mix dominated by low-margin items like flu and RSV tests, prior to the launch of its higher-margin TRU Flu and TRU RSV tests. For the first six months of fiscal 2008, Meridian reported net income of $14.8M, or $0.36 per share, up 29% from $11.5M, or $0.28 per share, a year ago. Net sales increased 15%, to $70.1M from $60.8M. Shares of Meridian fell more than 19.4%, or $6.54, to $27.19 in Thursday’s trading.
Meridian Bioscience, Inc. is a fully integrated life science company. The Company's principal businesses are the development, manufacture, sale and distribution of diagnostic test kits, primarily for certain respiratory, gastrointestinal, viral and parasitic infectious diseases; the manufacture and distribution of bulk antigens, antibodies, and reagents used by researchers and other diagnostic manufacturers, and the contract development and manufacture of proteins and other biologicals for use by biopharmaceutical and biotechnology companies engaged in research for new drugs and vaccines. Meridian's primary source of domestic and international revenues is core diagnostic products, which represented 80% of consolidated net sales. It has three business segments: US Diagnostics, European Diagnostics, and Life Science. Meridian's diagnostic products are used principally in the detection of respiratory diseases, such as pneumonia, valley fever, influenza, and Respiratory Syncytial Virus (RSV); gastrointestinal diseases, such as stomach ulcers (H. pylori), antibiotic-associated diarrhea (C. difficile) and pediatric diarrhea (Rotavirus and Adenovirus); viral diseases, such as Mononucleosis, Herpes Simplex, Chicken Pox and Shingles (Varicella-Zoster) and Cytomegalovirus (organ transplant infections), and parasitic diseases, such as Giardiasis, Cryptosporidiosis and Lyme. The primary markets and customers for these products are reference laboratories, hospitals, and physicians' offices. The European Diagnostics operating segment consists of the sale and distribution of diagnostics test kits in Europe, Africa and the Middle East. The Company's European Diagnostics operating segment's business focuses on the sale and distribution of diagnostic test kits, manufactured both by its US Diagnostics operating segment and by third-party vendors. Approximately 70% of third-party sales for this operating segment were products purchased from its US Diagnostics operating segment. Most of the revenue for the Company's Life Science operating segment comes from the manufacture, sale and distribution of bulk antigens, antibodies, and reagents used by researchers and other diagnostic companies. 27% of third-party sales for this segment was to one customer, a substantial portion, of which is under supply agreements that have annual automatic renewal provisions. The company was founded in 1976, currently employs nearly 400 people and is based in Cincinnati, Ohio.
On January 22nd, 2008, Meridian reported 1Q 2008 results. For the quarter, sales increased 18% to $33.8M from $28.7M the prior year. Net earnings increased 34% to $7.5M from $5.6M the prior year, representing a 29% increase on a per share basis of $.18/share in 2008 vs. $.14/share in the prior year same period. Reviewing the financials on Meridian, there is a stellar picture of steady revenue growth from $65.9M in 2003 to $123M in 2007 and $128.1M over the trailing twelve months (ttm). Earnings during this period have also steadily improved from $.21/share in 2003 to $.66/share in 2007 and $.70/share in the past year. The company also pays a dividend and has been steadily increasing that payment from $.15/share in 2003 to $.40/share in 2007 and $.43/share in the current year. The balance sheet is exceptional with $49M in cash, which by itself could pay off the $15.6M in current liabilities and the $2.6M in long-term liabilities combined. Calculating the current ratio, we find that Meridian has a total of $97M in current assets, which compared to the $15.6M in current liabilities yields a current ratio of 6.22. In addition, free cash flow is positive and has been growing from $16M in 2005 to $23M in 2007 and is currently at $27M.
Currently, the current market cap of $1.3B gives VIVO the small cap label and the company’s trailing P/E is a bit high at 39.87, with a forward P/E a bit better at 31.31. The PEG ratio also is a bit high at 1.70, with the ideal ratio being between 1.0 and 1.5. The PEG ratio is a stock's price/earnings ratio divided by its year-over-year earnings growth rate. The lower the PEG number, the better the value, because the investor would be paying less for each unit of earnings growth. Other fundamental indicators for VIVO are the Price/Sales measure, in that the stock is richly priced at 10.55, compared to the industry average of 4.90. Even at this price, the Return on Equity is ahead of the pack with a 26.59% value compared to the industry average of 20.72%. The company, as noted, does pay a dividend and has a yield of 1.6%. The company is paying 62% of its earnings in dividends, known as the payout ratio. Also, the last stock split was a 3:2 split back on May 14th, 2007. As for the stock itself, there are 40.08 million shares outstanding with 38.37 million that float. The company has increased its stock price from $2.50 back in January, 2003, to a recent high of $37 recorded in April, 2008. The stock is quite small and is priced to as close to fair value as possible and for that reason could be vulnerable to a correction to more reasonable values should the company fail to meet expectations.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Meridian Bioscience, Inc. is a fully integrated life science company. The Company's principal businesses are the development, manufacture, sale and distribution of diagnostic test kits, primarily for certain respiratory, gastrointestinal, viral and parasitic infectious diseases; the manufacture and distribution of bulk antigens, antibodies, and reagents used by researchers and other diagnostic manufacturers, and the contract development and manufacture of proteins and other biologicals for use by biopharmaceutical and biotechnology companies engaged in research for new drugs and vaccines. Meridian's primary source of domestic and international revenues is core diagnostic products, which represented 80% of consolidated net sales. It has three business segments: US Diagnostics, European Diagnostics, and Life Science. Meridian's diagnostic products are used principally in the detection of respiratory diseases, such as pneumonia, valley fever, influenza, and Respiratory Syncytial Virus (RSV); gastrointestinal diseases, such as stomach ulcers (H. pylori), antibiotic-associated diarrhea (C. difficile) and pediatric diarrhea (Rotavirus and Adenovirus); viral diseases, such as Mononucleosis, Herpes Simplex, Chicken Pox and Shingles (Varicella-Zoster) and Cytomegalovirus (organ transplant infections), and parasitic diseases, such as Giardiasis, Cryptosporidiosis and Lyme. The primary markets and customers for these products are reference laboratories, hospitals, and physicians' offices. The European Diagnostics operating segment consists of the sale and distribution of diagnostics test kits in Europe, Africa and the Middle East. The Company's European Diagnostics operating segment's business focuses on the sale and distribution of diagnostic test kits, manufactured both by its US Diagnostics operating segment and by third-party vendors. Approximately 70% of third-party sales for this operating segment were products purchased from its US Diagnostics operating segment. Most of the revenue for the Company's Life Science operating segment comes from the manufacture, sale and distribution of bulk antigens, antibodies, and reagents used by researchers and other diagnostic companies. 27% of third-party sales for this segment was to one customer, a substantial portion, of which is under supply agreements that have annual automatic renewal provisions. The company was founded in 1976, currently employs nearly 400 people and is based in Cincinnati, Ohio.
On January 22nd, 2008, Meridian reported 1Q 2008 results. For the quarter, sales increased 18% to $33.8M from $28.7M the prior year. Net earnings increased 34% to $7.5M from $5.6M the prior year, representing a 29% increase on a per share basis of $.18/share in 2008 vs. $.14/share in the prior year same period. Reviewing the financials on Meridian, there is a stellar picture of steady revenue growth from $65.9M in 2003 to $123M in 2007 and $128.1M over the trailing twelve months (ttm). Earnings during this period have also steadily improved from $.21/share in 2003 to $.66/share in 2007 and $.70/share in the past year. The company also pays a dividend and has been steadily increasing that payment from $.15/share in 2003 to $.40/share in 2007 and $.43/share in the current year. The balance sheet is exceptional with $49M in cash, which by itself could pay off the $15.6M in current liabilities and the $2.6M in long-term liabilities combined. Calculating the current ratio, we find that Meridian has a total of $97M in current assets, which compared to the $15.6M in current liabilities yields a current ratio of 6.22. In addition, free cash flow is positive and has been growing from $16M in 2005 to $23M in 2007 and is currently at $27M.
Currently, the current market cap of $1.3B gives VIVO the small cap label and the company’s trailing P/E is a bit high at 39.87, with a forward P/E a bit better at 31.31. The PEG ratio also is a bit high at 1.70, with the ideal ratio being between 1.0 and 1.5. The PEG ratio is a stock's price/earnings ratio divided by its year-over-year earnings growth rate. The lower the PEG number, the better the value, because the investor would be paying less for each unit of earnings growth. Other fundamental indicators for VIVO are the Price/Sales measure, in that the stock is richly priced at 10.55, compared to the industry average of 4.90. Even at this price, the Return on Equity is ahead of the pack with a 26.59% value compared to the industry average of 20.72%. The company, as noted, does pay a dividend and has a yield of 1.6%. The company is paying 62% of its earnings in dividends, known as the payout ratio. Also, the last stock split was a 3:2 split back on May 14th, 2007. As for the stock itself, there are 40.08 million shares outstanding with 38.37 million that float. The company has increased its stock price from $2.50 back in January, 2003, to a recent high of $37 recorded in April, 2008. The stock is quite small and is priced to as close to fair value as possible and for that reason could be vulnerable to a correction to more reasonable values should the company fail to meet expectations.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Wednesday, April 16, 2008
BetterTrades looks at Johnson Controls Inc.
Global demand for energy efficient buildings helped boost 2Q earnings 27% for building and auto systems maker Johnson Controls Inc. (JCI). The Milwaukee-based company said it earned $289M, or $0.48 per share, in the quarter, compared with $228M, or $0.38 per share, in the year-ago quarter. Sales increased 11% to $9.41B from $8.49B a year earlier. The earnings just beat the expectations of analysts, who had expected earnings of $0.47 per share on revenues of $9.37B. For the company, building efficiency sales were up 11% to $3.3B due to growing demand for such systems in nonresidential buildings. These systems improve energy efficiency and reduce greenhouse gas emissions. In another related area, power solution sales, which include batteries, rocketed higher by 47% to $1.5B. This increase was mainly due to higher prices because of increased lead costs. Also, sales of automotive interiors were up 2% to $4.6B, but the U.S. sector continued to slump. Sales in North America were down 7% in the sector while sales in Europe were up 9%, and higher as well in Asia/Pacific, up 8%. The company maintained its expectations for its 3Q earnings of between $0.74 and $0.76 per share, along with Johnson Controls increasing by $1B, its full-year sales prediction, to $39B. Shares jumped higher on the day, up 5.9%, or $1.92, to $34.55 in today’s trading.
Johnson Controls, Inc. operates as an automotive experience, building efficiency, and power solutions company worldwide. It operates in three segments: Building Efficiency, Automotive Experience, and Power Solutions. The Building Efficiency segment engages in the design, production, marketing, and installation of control systems that monitor, automate, and integrate building operating equipment and conditions. It also provides various technical services, including the inspection, scheduled maintenance, and repair and replacement of mechanical and control systems; designs and produces heating and air conditioning solutions for residential and light commercial applications; and provides onsite staff for real estate services. This segment sells its products and services through a network of sales and service offices, and to distributors of air-conditioning, refrigeration, and commercial heating systems. The Automotive Experience segment designs and manufactures automotive interior systems, including seating systems and components; cockpit systems comprising instrument clusters, information displays, and body controllers; overhead systems consisting of headliners and electronic convenience features; floor consoles; and door systems. Its products and systems are used in passenger cars and light trucks, including vans, pick-up trucks, and sport/crossover utility vehicles. The company primarily offers these systems to original equipment manufacturers. The Power solutions segment produces lead-acid batteries for the automotive original equipment vehicle manufacturers and the battery aftermarket. The company was founded in 1885, currently employs more than 140,000 workers and is headquartered in Milwaukee, Wisconsin.
What makes JCI easy to own is its diversification. It’s like three investments in one and each are still small enough to grow. The Buildings’ segment earnings account for half of the profitability of JCI and it’s been the more successful segment growing due to the demand for industries to be more environmentally conscious. The automotive sector is the weakest performing but yet the largest segment in terms of sales, however, margins on the power solutions make Johnson Controls a well oiled machine. Energy savings can come from unexpected places, like car seats. Johnson Controls' EcoClimate seat provides much higher heat absorption and moisture absorption than conventional seating, which in turn provides for passenger comfort with less use of the vehicle's air conditioner. In addition, efficient buildings are much more complex than simply replacing inefficient HVAC and lighting with more efficient versions. Quite often, the most cost effective measures come from using systems more efficiently. In commercial and industrial buildings, the most economical gains also involve using existing equipment more wisely. The company offers a full suite of products focused on automation and integration to businesses and residential customers alike. JCI also supplies automotive battery management systems and power systems, with a focus on energy savings, as part of their automotive division.
The stock has declined significantly since the start of the year, but it currently seems near fair-value at the current price of around $34 to $35. However, a decline in auto sales caused by a slowing economy, along with an increased debt burden due to recent acquisitions could easily hurt short-term profits. With continued stock market weakness, patient investors could easily see some excellent buying opportunities in the next six-to-twelve months. The management has forecasted 10% increases in sales and 18% increase in earnings. The general consensus of the analysts agrees that the company is being conservative and will outperform its own guidance. Besides, the company does have a track record of not missing earnings. Case in point, the company has recently announced that they have raised their quarterly dividends by 18%, the 33rd straight year the company has increased their dividend yields. Since energy efficiency is the most cost effective form of alternative energy, this business is much less susceptible to the wild roller-coaster ride of other alternative energy stocks which gyrate wildly in response to fears, or hopes, of skyrocketing energy prices.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Johnson Controls, Inc. operates as an automotive experience, building efficiency, and power solutions company worldwide. It operates in three segments: Building Efficiency, Automotive Experience, and Power Solutions. The Building Efficiency segment engages in the design, production, marketing, and installation of control systems that monitor, automate, and integrate building operating equipment and conditions. It also provides various technical services, including the inspection, scheduled maintenance, and repair and replacement of mechanical and control systems; designs and produces heating and air conditioning solutions for residential and light commercial applications; and provides onsite staff for real estate services. This segment sells its products and services through a network of sales and service offices, and to distributors of air-conditioning, refrigeration, and commercial heating systems. The Automotive Experience segment designs and manufactures automotive interior systems, including seating systems and components; cockpit systems comprising instrument clusters, information displays, and body controllers; overhead systems consisting of headliners and electronic convenience features; floor consoles; and door systems. Its products and systems are used in passenger cars and light trucks, including vans, pick-up trucks, and sport/crossover utility vehicles. The company primarily offers these systems to original equipment manufacturers. The Power solutions segment produces lead-acid batteries for the automotive original equipment vehicle manufacturers and the battery aftermarket. The company was founded in 1885, currently employs more than 140,000 workers and is headquartered in Milwaukee, Wisconsin.
What makes JCI easy to own is its diversification. It’s like three investments in one and each are still small enough to grow. The Buildings’ segment earnings account for half of the profitability of JCI and it’s been the more successful segment growing due to the demand for industries to be more environmentally conscious. The automotive sector is the weakest performing but yet the largest segment in terms of sales, however, margins on the power solutions make Johnson Controls a well oiled machine. Energy savings can come from unexpected places, like car seats. Johnson Controls' EcoClimate seat provides much higher heat absorption and moisture absorption than conventional seating, which in turn provides for passenger comfort with less use of the vehicle's air conditioner. In addition, efficient buildings are much more complex than simply replacing inefficient HVAC and lighting with more efficient versions. Quite often, the most cost effective measures come from using systems more efficiently. In commercial and industrial buildings, the most economical gains also involve using existing equipment more wisely. The company offers a full suite of products focused on automation and integration to businesses and residential customers alike. JCI also supplies automotive battery management systems and power systems, with a focus on energy savings, as part of their automotive division.
The stock has declined significantly since the start of the year, but it currently seems near fair-value at the current price of around $34 to $35. However, a decline in auto sales caused by a slowing economy, along with an increased debt burden due to recent acquisitions could easily hurt short-term profits. With continued stock market weakness, patient investors could easily see some excellent buying opportunities in the next six-to-twelve months. The management has forecasted 10% increases in sales and 18% increase in earnings. The general consensus of the analysts agrees that the company is being conservative and will outperform its own guidance. Besides, the company does have a track record of not missing earnings. Case in point, the company has recently announced that they have raised their quarterly dividends by 18%, the 33rd straight year the company has increased their dividend yields. Since energy efficiency is the most cost effective form of alternative energy, this business is much less susceptible to the wild roller-coaster ride of other alternative energy stocks which gyrate wildly in response to fears, or hopes, of skyrocketing energy prices.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Tuesday, April 15, 2008
BetterTrades looks at Massey Energy Company
Shares of Massey Energy Co. (MEE) climbed Tuesday morning after a JPMorgan analyst upgraded the coal producer, saying a tighter coal market is pushing prices higher. The analyst upgraded Massey to "Overweight" from "Neutral" in a note to investors Monday, saying recent developments in the coal industry are reducing supply and driving up prices. Consol Energy Inc.'s (CNX) 2007 mine closure in Buchanan, Va., port problems and heavy rains in Australia and problems at Cleveland-Cliffs Inc.'s (CLF) Pinnacle mine have all led to a tighter coal market and record high prices. Massey is thusly priced at a discount compared to its more regionally diverse peers and is an attractive buy if it is able to exploit the higher coal prices and boost exports. The analyst boosted his profit forecast for the Richmond, Va.-based Massey to $2.84 per share from $2.77 in 2008 and to $5.09 per share from $2.96 in 2009, well above Wall Street estimates. Analysts polled expect per share earnings of $2.44 in 2008 and $3.10 in 2009. Shares of Massey gained $2.31, or 4.9%, to $49.50. In addition to being upgraded, the federal Mine Safety and Health Administration plans to give a safety award to a Massey Energy Co. underground mine where two men were killed in a January 2006 fire. The award, which was given by MSHA's southern West Virginia district office, is based solely on the number of hours worked and the number of injury accidents. Aracoma had zero lost work time with the most hours worked, compared to operations of similar size that also were considered for the award. Winning a safety award is a turnaround for Alma and Massey, the nation's fourth-largest coal mine operator by revenue.
Massey Energy Company, incorporated in 1920 and currently employs nearly 5,500 people, produces, processes and sells bituminous coal of steam and metallurgical grades, primarily of low-sulfur content, through its processing and shipping centers, called Resource Groups, many of which receive coal from multiple coal mines. Massey generates revenues through the mining, processing and selling of steam and metallurgical grade coal, as well as through other coal-related businesses, including the management of material handling facilities and a synfuel production plant. As of January 31st, 2008, the Company operated 47 mines, including 35 underground mines, one of which employ both room and pillar, and longwall mining, and 12 surface mines, with seven highwall miners in operation, in West Virginia, Kentucky and Virginia. Massey produces coal using four distinct mining methods: underground room and pillar, underground longwall, surface and highwall mining. The Company's steam coal is primarily purchased by utilities and industrial clients as fuel for their power plants. Its metallurgical coal is used primarily to make coke for use in the manufacturing of steel. Massey also holds a 50% interest in a joint venture that owns and operates third-party end user coal handling facilities. Certain subsidiaries operate the coal handling facilities for the joint venture. The Company holds interests in operations that produce, gather and market natural gas from shallow reservoirs in the Appalachian Basin. In addition, it owns a majority working interest in 48 wells operated by others, and minority working interests in approximately 30 wells operated by others. From time to time, the Company also engages in the sale of certain non-strategic assets, such as timber, oil and gas rights, surface properties and reserves. Finally, it has established several contractual arrangements with customers where services other than coal supply are provided on an ongoing basis. These services include arrangements with several metallurgical and industrial customers to coordinate shipment of coal to their stockpiles, maintain ownership of the coal inventory on their property and sell tonnage to them as it is consumed.
Massey is different than many other coal stocks in that it’s focused on metallurgical coal, that which goes into the production of steel. Also, the price of coking coal, a key ingredient in steelmaking, is expected to rise by 150% to 200%, driving up steel prices further. Coking is the solid carbonaceous material derived from destructive distillation of low-ash, low-sulfur bituminous coal. In this world of shortages it appears China's rapid efforts to build entirely new cities is going to strain all sorts of energy sources. Once those cities are built, and people move in, energy needs go up. Massey already announced plans in October of 2007 to add 8 million tons of production by 2010. Now the company is considering ways to up coal output even more and to do so by 2009. The upside to increasing production is that with strong demand for imports to China, India and Eastern Europe these demands will combine with higher ocean freight rates and will support stronger prices for coal. Massey projects 2008 coal shipments to top 2007 levels, with higher prices and forecasted shipments increasing in both 2009 and 2010. New metallurgical coal business is expected to close at prices more than $10 per-ton higher than a year ago. According to the EIA, 67% of the world’s recoverable reserves are located in four countries: the United States, 27%, Russia, 17%, China, 13%, and India, 10%. China and India account for 70% of the projected increase in the world coal consumption and much of the increase is in their demand for energy, particularly in the industrial and electricity sectors, all of which these needs are expected to be met by coal.
Massey announced recently that the company was spending $480M to expand its Central Appalachian mines so it can export more and take advantage of increasing demand from the global steel industry. The two-year plan to produce more tons of coal would also position Massey as the dominant low-cost producer of coal in the declining coalfields of Virginia, Kentucky and West Virginia. Because it is expanding existing mines and using new equipment, Massey would be able to keep down costs. Coal is a hard, black byproduct of fossilized plants which accounts for 25% of global energy consumption, significantly less than crude oil, 39%, but more than natural gas, 22%. Coal is cheap and abundant compared to crude oil and natural gas and is used mainly in electricity production and in the manufacturing of steel. As prices for crude oil, natural gas and even uranium have risen more than 100% in the last year, coal and coal stocks have not been part of this rally. In turn, coal and coal stocks will not have to wait much longer for their turn to run. Coal prices have shot up in recent months, particularly because of strong foreign demand for metallurgical grade coal. As of December, federal government figures show that coal prices had increased to $89.37 a ton from $83.92 in July. But Massey and other coal companies reported sales at $150 a ton or more. With that being said, Massey recently raised their selling price of coal $54 to $56 per ton, to $61 to $63 per ton for 2008. Along with that increase, the company then issued guidance for price estimates for 2009 and 2010. In ’09, the price target was raised to $65 to $74 per ton, while 2010’s numbers were increased to $75 to $87 per ton, up from $64 to $66 per ton. Now these coal stocks won't jump or fall 25% in a day like other volatile sectors, but they should be a more sustainable play. The risk of course is when the global markets eventually slow. But the reality will show itself and those companies in the right areas should profit nicely.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Massey Energy Company, incorporated in 1920 and currently employs nearly 5,500 people, produces, processes and sells bituminous coal of steam and metallurgical grades, primarily of low-sulfur content, through its processing and shipping centers, called Resource Groups, many of which receive coal from multiple coal mines. Massey generates revenues through the mining, processing and selling of steam and metallurgical grade coal, as well as through other coal-related businesses, including the management of material handling facilities and a synfuel production plant. As of January 31st, 2008, the Company operated 47 mines, including 35 underground mines, one of which employ both room and pillar, and longwall mining, and 12 surface mines, with seven highwall miners in operation, in West Virginia, Kentucky and Virginia. Massey produces coal using four distinct mining methods: underground room and pillar, underground longwall, surface and highwall mining. The Company's steam coal is primarily purchased by utilities and industrial clients as fuel for their power plants. Its metallurgical coal is used primarily to make coke for use in the manufacturing of steel. Massey also holds a 50% interest in a joint venture that owns and operates third-party end user coal handling facilities. Certain subsidiaries operate the coal handling facilities for the joint venture. The Company holds interests in operations that produce, gather and market natural gas from shallow reservoirs in the Appalachian Basin. In addition, it owns a majority working interest in 48 wells operated by others, and minority working interests in approximately 30 wells operated by others. From time to time, the Company also engages in the sale of certain non-strategic assets, such as timber, oil and gas rights, surface properties and reserves. Finally, it has established several contractual arrangements with customers where services other than coal supply are provided on an ongoing basis. These services include arrangements with several metallurgical and industrial customers to coordinate shipment of coal to their stockpiles, maintain ownership of the coal inventory on their property and sell tonnage to them as it is consumed.
Massey is different than many other coal stocks in that it’s focused on metallurgical coal, that which goes into the production of steel. Also, the price of coking coal, a key ingredient in steelmaking, is expected to rise by 150% to 200%, driving up steel prices further. Coking is the solid carbonaceous material derived from destructive distillation of low-ash, low-sulfur bituminous coal. In this world of shortages it appears China's rapid efforts to build entirely new cities is going to strain all sorts of energy sources. Once those cities are built, and people move in, energy needs go up. Massey already announced plans in October of 2007 to add 8 million tons of production by 2010. Now the company is considering ways to up coal output even more and to do so by 2009. The upside to increasing production is that with strong demand for imports to China, India and Eastern Europe these demands will combine with higher ocean freight rates and will support stronger prices for coal. Massey projects 2008 coal shipments to top 2007 levels, with higher prices and forecasted shipments increasing in both 2009 and 2010. New metallurgical coal business is expected to close at prices more than $10 per-ton higher than a year ago. According to the EIA, 67% of the world’s recoverable reserves are located in four countries: the United States, 27%, Russia, 17%, China, 13%, and India, 10%. China and India account for 70% of the projected increase in the world coal consumption and much of the increase is in their demand for energy, particularly in the industrial and electricity sectors, all of which these needs are expected to be met by coal.
Massey announced recently that the company was spending $480M to expand its Central Appalachian mines so it can export more and take advantage of increasing demand from the global steel industry. The two-year plan to produce more tons of coal would also position Massey as the dominant low-cost producer of coal in the declining coalfields of Virginia, Kentucky and West Virginia. Because it is expanding existing mines and using new equipment, Massey would be able to keep down costs. Coal is a hard, black byproduct of fossilized plants which accounts for 25% of global energy consumption, significantly less than crude oil, 39%, but more than natural gas, 22%. Coal is cheap and abundant compared to crude oil and natural gas and is used mainly in electricity production and in the manufacturing of steel. As prices for crude oil, natural gas and even uranium have risen more than 100% in the last year, coal and coal stocks have not been part of this rally. In turn, coal and coal stocks will not have to wait much longer for their turn to run. Coal prices have shot up in recent months, particularly because of strong foreign demand for metallurgical grade coal. As of December, federal government figures show that coal prices had increased to $89.37 a ton from $83.92 in July. But Massey and other coal companies reported sales at $150 a ton or more. With that being said, Massey recently raised their selling price of coal $54 to $56 per ton, to $61 to $63 per ton for 2008. Along with that increase, the company then issued guidance for price estimates for 2009 and 2010. In ’09, the price target was raised to $65 to $74 per ton, while 2010’s numbers were increased to $75 to $87 per ton, up from $64 to $66 per ton. Now these coal stocks won't jump or fall 25% in a day like other volatile sectors, but they should be a more sustainable play. The risk of course is when the global markets eventually slow. But the reality will show itself and those companies in the right areas should profit nicely.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Monday, April 14, 2008
BetterTrades looks at Visa Inc.
Shares of Visa Inc. (V) gained in electronic trading Monday after two analysts began covering the credit card company with positive ratings. One analyst from Cowen & Co. and the other from Keefe Bruyette & Woods both stated that an increase in worldwide credit card use will lift Visa Inc’s shares, and they both assigned "Outperform" ratings on the San Francisco Company. The analyst from Cowen & Co. expects Visa's profits to grow more than 20% over the next two or three years, with revenues growing by at least 9%. The analyst also stated that the company should do well in spite of the slowing economic growth in the U.S. The other analyst, from Keefe Bruyette & Woods set a target price of $80 per share for Visa. The two analysts, collectively, think Visa will earn $2.59 per share in fiscal 2008 and $3.39 per share in fiscal 2009, but the two analysts expect smaller profits in both years. Shares of Visa retreated today, down $0.43, or 0.7%, to $65.68 in trading, up from Friday's closing price of $66.11. The stock began trading March 19th, and has ranged between $55 and $69.
Visa Inc., incorporated on May 25th, 2007, is a retail electronic payments network. The Company facilitates global commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses and government entities. Its primary customers are financial institutions, for which it provides processing services and payment product platforms, including platforms for consumer credit, debit, prepaid and commercial payments. The Company has three business operations: transaction processing services, product platforms and payments network management. In October 2007, the Company completed the series of transactions, in which Visa U.S.A., Visa International, Visa Canada and Inovant became direct or indirect subsidiaries of Visa Inc. Visa Europe did not become a subsidiary of Visa Inc., but rather remained owned and governed by its European member financial institutions and entered into a set of contractual arrangements with the Company in connection with the reorganization. The Company owns a facility of payment brands, including Visa, Visa Electron, PLUS and Interlink, which it licenses to its customers for use in their payment programs. Visa Inc. offers a range of branded payments product platforms, which its customers use to develop and offer credit, charge, deferred debit, debit, prepaid and cash access programs for cardholders. It manages and promotes its brands for the benefit of the Company's customers through advertising, promotional and sponsorship initiatives and by card usage and merchant acceptance. It provides transaction processing services to its customers through VisaNet, its centralized, global processing platform. It provides various other processing-related services to its customers, including risk management, debit issuer processing, loyalty services, dispute management and value-added information services. The Company develops new products and services to enable its customers to offer effective payment methods to their cardholders and merchants. It adopts and enforces rules applicable its customers to ensure secure functioning of its payments network and the maintenance and promotion of its brands. The Company was founded in 1958, currently employs nearly 5,500 people and is headquartered in San Francisco, California.
Visa was the most anticipated IPO in a long time. Shares are currently well above their IPO price with Friday's close at $66.11. Visa’s record-setting $17.86B initial public offering last month provided a much-needed dose of good news to the economic quagmire we’re in. For its March 19th IPO, Visa’s 406 million shares were originally priced at $44 each, well above the expected price range of $37 to $42 a share. The $17.86B in proceeds it took made it the biggest U.S. public offering, shattering the $10.6B AT&T Wireless (T) raised in its April 2000 IPO. Visa’s shares opened at $59.50 on the New York Stock Exchange, and traded as high as $65, before closing at $56.50, up $12.50 a share, or 28.41%. The following day, shares jumped another 13.89%. The initial run-up and continued growth gives the San Francisco-based Visa a market value of more than $52B. There is also definitely a shift from cash to credit cards worldwide, just as there was a shift from renting to home ownership based on the wide availability of mortgages. The advantage for Visa is that the company gets paid a fee which is equal to a percentage of each transaction, thus assuming no credit risk. In fact, those fees even increased during the last two U.S. downturns, 1991 and 2001. Visa enjoys a dominant share of global credit card processing volume. Of the roughly $6 trillion in total transactions processed by the six largest payment processing firms in 2006, Visa held a 55% share. That compares to just 32% for its main rival, MasterCard. And in terms of the total number of transactions, Visa held a 60% share in 2006 against MasterCard's 31%.
Visa, like its main rival MasterCard (MA), is not a bank and it does not make loans, assume credit risk or set interest rates on credit cards, the actual loan is made by the bank or consumer credit firm that issues the card. Rather, Visa simply handles the processing of card payments made with Visa branded cards. Visa derives revenues in two main ways: fees charged to merchants every time a payment is processed, and the licensing fees it charges banks for the use of its "Visa" brand. Visa's main competitive advantage is its size and the widespread acceptance of its cards. Specifically, Visa cards are accepted by more merchants than any other brand, including American Express (AXP) and MasterCard. Investors have been eager to grab shares in Visa’s offering as shares of the much-smaller rival MasterCard Inc. have more than quadrupled in value since the company went public in May 2006. Visa generated $5.2B in revenues last year as it handled more than 44 billion transactions totaling more than $3.2 trillion. Looking ahead, Visa is slated to report earnings April 28th, and while in their quiet period, no news beforehand is considered good news. There were no warnings because Visa will have better than expected 1Q numbers, but what will the future look like? Well, one is that the company currently intends to pay a quarterly dividend, in cash, at an annual rate initially equal to $0.42 per share of class-A common stock, representing a quarterly rate initially equal to $0.105 per share, commencing with the quarter ending June 30th, 2008. Also, the Company has shown nearly 76% growth in revenues and nearly 107% growth in net income in the quarter ending Dec. 2007 as compared to the quarter ending Dec. 2006. In addition, new and renewed volume and support incentive agreements executed late in the 1Q of fiscal 2008 are expected to increase volume and support incentives significantly during the second 2Q. Conclusively, the company’s balance sheet is strong and cash flows are very-well off so that the company will be able to payout dividends in addition to supporting future growth.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Visa Inc., incorporated on May 25th, 2007, is a retail electronic payments network. The Company facilitates global commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses and government entities. Its primary customers are financial institutions, for which it provides processing services and payment product platforms, including platforms for consumer credit, debit, prepaid and commercial payments. The Company has three business operations: transaction processing services, product platforms and payments network management. In October 2007, the Company completed the series of transactions, in which Visa U.S.A., Visa International, Visa Canada and Inovant became direct or indirect subsidiaries of Visa Inc. Visa Europe did not become a subsidiary of Visa Inc., but rather remained owned and governed by its European member financial institutions and entered into a set of contractual arrangements with the Company in connection with the reorganization. The Company owns a facility of payment brands, including Visa, Visa Electron, PLUS and Interlink, which it licenses to its customers for use in their payment programs. Visa Inc. offers a range of branded payments product platforms, which its customers use to develop and offer credit, charge, deferred debit, debit, prepaid and cash access programs for cardholders. It manages and promotes its brands for the benefit of the Company's customers through advertising, promotional and sponsorship initiatives and by card usage and merchant acceptance. It provides transaction processing services to its customers through VisaNet, its centralized, global processing platform. It provides various other processing-related services to its customers, including risk management, debit issuer processing, loyalty services, dispute management and value-added information services. The Company develops new products and services to enable its customers to offer effective payment methods to their cardholders and merchants. It adopts and enforces rules applicable its customers to ensure secure functioning of its payments network and the maintenance and promotion of its brands. The Company was founded in 1958, currently employs nearly 5,500 people and is headquartered in San Francisco, California.
Visa was the most anticipated IPO in a long time. Shares are currently well above their IPO price with Friday's close at $66.11. Visa’s record-setting $17.86B initial public offering last month provided a much-needed dose of good news to the economic quagmire we’re in. For its March 19th IPO, Visa’s 406 million shares were originally priced at $44 each, well above the expected price range of $37 to $42 a share. The $17.86B in proceeds it took made it the biggest U.S. public offering, shattering the $10.6B AT&T Wireless (T) raised in its April 2000 IPO. Visa’s shares opened at $59.50 on the New York Stock Exchange, and traded as high as $65, before closing at $56.50, up $12.50 a share, or 28.41%. The following day, shares jumped another 13.89%. The initial run-up and continued growth gives the San Francisco-based Visa a market value of more than $52B. There is also definitely a shift from cash to credit cards worldwide, just as there was a shift from renting to home ownership based on the wide availability of mortgages. The advantage for Visa is that the company gets paid a fee which is equal to a percentage of each transaction, thus assuming no credit risk. In fact, those fees even increased during the last two U.S. downturns, 1991 and 2001. Visa enjoys a dominant share of global credit card processing volume. Of the roughly $6 trillion in total transactions processed by the six largest payment processing firms in 2006, Visa held a 55% share. That compares to just 32% for its main rival, MasterCard. And in terms of the total number of transactions, Visa held a 60% share in 2006 against MasterCard's 31%.
Visa, like its main rival MasterCard (MA), is not a bank and it does not make loans, assume credit risk or set interest rates on credit cards, the actual loan is made by the bank or consumer credit firm that issues the card. Rather, Visa simply handles the processing of card payments made with Visa branded cards. Visa derives revenues in two main ways: fees charged to merchants every time a payment is processed, and the licensing fees it charges banks for the use of its "Visa" brand. Visa's main competitive advantage is its size and the widespread acceptance of its cards. Specifically, Visa cards are accepted by more merchants than any other brand, including American Express (AXP) and MasterCard. Investors have been eager to grab shares in Visa’s offering as shares of the much-smaller rival MasterCard Inc. have more than quadrupled in value since the company went public in May 2006. Visa generated $5.2B in revenues last year as it handled more than 44 billion transactions totaling more than $3.2 trillion. Looking ahead, Visa is slated to report earnings April 28th, and while in their quiet period, no news beforehand is considered good news. There were no warnings because Visa will have better than expected 1Q numbers, but what will the future look like? Well, one is that the company currently intends to pay a quarterly dividend, in cash, at an annual rate initially equal to $0.42 per share of class-A common stock, representing a quarterly rate initially equal to $0.105 per share, commencing with the quarter ending June 30th, 2008. Also, the Company has shown nearly 76% growth in revenues and nearly 107% growth in net income in the quarter ending Dec. 2007 as compared to the quarter ending Dec. 2006. In addition, new and renewed volume and support incentive agreements executed late in the 1Q of fiscal 2008 are expected to increase volume and support incentives significantly during the second 2Q. Conclusively, the company’s balance sheet is strong and cash flows are very-well off so that the company will be able to payout dividends in addition to supporting future growth.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Friday, April 11, 2008
BetterTrades looks at U.S. Steel Corp.
Shares of steel producers gained for the past week as rising prices for the commodity led one analyst to boost his price target for shares of United States Steel Corp (X). An analyst from Deutsche Bank-North America said in a client note that U.S. Steel is best positioned in America's coverage to benefit from rising steel prices via its integrated business model. The target price on the stock was raised from $130 to $165 a share. The company is insulated from soaring prices for iron, the raw material used for steel, because it produces virtually all the iron it consumes, and its iron output is increasing. U.S. Steel is partially isolated from skyrocketing prices for coal, which is needed to make carbon steel, because it has signed longer-term contracts with its coal suppliers and has disclosed that its requirements are locked up for 2008 with marginal increases. In addition, a UBS analyst also spoke about higher steel prices, saying that their firm’s survey indicates that metal prices are rising into the 2Q of 2008 despite lackluster demand. The report said that the benchmark sheet of steel could rise to $1,000 per ton from $550 per ton in 2007. U.S. Steel has gone from a U.S.-only company with three plants pumping out 12 million tons per year in 2000 to operating in four countries with an output of 32 million tons per year today.
United States Steel Corporation produces steel products. It operates through three segments: Flat-rolled Products, U. S. Steel Europe, and Tubular Products. The Flat-rolled Products segment produces slabs, sheets, tin mill products, strip mill plates, rounds, and coke. It serves customers in the service center, conversion, transportation, construction, container, and appliance and electrical markets in North America. The U.S. Steel Europe segment manufactures and sells sheet, strip mill plate, tin mill, and tubular products, as well as heating radiators and refractories. It serves customers in the central, western, and southern European construction, service center, conversion, container, transportation, and appliance and electrical, as well as oil, gas, and petrochemical markets. The Tubular products segment produces and sells seamless and welded tubular products for the oil, gas, and petrochemical markets. United States Steel Corporation also involves in the production and sale of iron ore pellets, as well as the provision of transportation services. In addition, it owns, develops, and manages various real estate assets, which include approximately 200,000 acres of surface rights primarily in Alabama, Maryland, Michigan, Minnesota, and Pennsylvania; participates in joint ventures that develop real estate projects in Alabama, Illinois, and Maryland; and owns approximately 4,000 acres of land in Ontario, Canada. Further, the company provides engineering and consulting services, which include the preparation of studies, mine and process audits, basic and detailed engineering, project and construction management, procurement, start-up and commissioning, and training and operations assistance to the mining and mineral processing sectors. United States Steel Corporation was founded in 1901, currently employs nearly 50,000 people and is headquartered in Pittsburgh, Pennsylvania.
Despite recent volatility in the broader markets, the steel sector has exhibited fantastic price action, supported by solid earnings and growth. With day traders and investors alike trying to find the newest momentum plays, steel companies are making fresh 52-week highs almost daily. Obviously, there is a fundamental reason behind the steel rally. For starters, steel plays a critical role in the infrastructural development and overall economy of any developing nation. In fact, between 2000 and 2005, world steel demand increased by 6% a year. And while the most recent consumption figures have yet to be published, it is widely speculated that recent consumption has grown at an even greater rate, along the lines of 10% to 15%. In addition, the price of scrap metal, a key raw material for some steelmakers, has hit record highs and manufacturers are likely to impose steep surcharges to cover the extra costs. The American Metal Market's April scrap index increased to $162 per ton to $555 per ton, a 25% jump higher than the previous record of $443 per ton in November 2004. Six months ago, at the Bureau of International Recycling conference in Warsaw, delegates were told that demand for steel scrap in the United States was firm, with prices at around $300 for shredded and $315/320 for prime scrap. Scrap is the major feedstock for electric arc furnaces operated by mini-mill steelmakers, while integrated steel producers, like U.S. Steel, make their products in blast furnaces which use coking coal to melt iron ore. Coking is the solid carbonaceous material derived from destructive distillation of low-ash, low-sulfur bituminous coal.
Analysts expect U.S. Steel's 2008 revenues to increase 13% to 17%, primarily stemming from acquisitions. Further, distributor inventory levels reached unsustainably low levels in 2007 and the replenishing in 2008 should benefit U.S. Steel. Meanwhile, oil producer country tube/tube-related products should remain strong, and additional steel sector consolidation should help the sector regain modest pricing power. They also have diversified business in relation with their core steel business, making them an attractive and safe investment. U.S. Steel is also involved in a number of other businesses, among them transportation, real estate development, leasing and financial services. With steel imports from China down, and all their steel being consumed there, U.S. manufacturers will have to buy from U.S. makers. If this remains to be the case, stocks like U.S. Steel should be able to benefit greatly from this over the next several months.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
United States Steel Corporation produces steel products. It operates through three segments: Flat-rolled Products, U. S. Steel Europe, and Tubular Products. The Flat-rolled Products segment produces slabs, sheets, tin mill products, strip mill plates, rounds, and coke. It serves customers in the service center, conversion, transportation, construction, container, and appliance and electrical markets in North America. The U.S. Steel Europe segment manufactures and sells sheet, strip mill plate, tin mill, and tubular products, as well as heating radiators and refractories. It serves customers in the central, western, and southern European construction, service center, conversion, container, transportation, and appliance and electrical, as well as oil, gas, and petrochemical markets. The Tubular products segment produces and sells seamless and welded tubular products for the oil, gas, and petrochemical markets. United States Steel Corporation also involves in the production and sale of iron ore pellets, as well as the provision of transportation services. In addition, it owns, develops, and manages various real estate assets, which include approximately 200,000 acres of surface rights primarily in Alabama, Maryland, Michigan, Minnesota, and Pennsylvania; participates in joint ventures that develop real estate projects in Alabama, Illinois, and Maryland; and owns approximately 4,000 acres of land in Ontario, Canada. Further, the company provides engineering and consulting services, which include the preparation of studies, mine and process audits, basic and detailed engineering, project and construction management, procurement, start-up and commissioning, and training and operations assistance to the mining and mineral processing sectors. United States Steel Corporation was founded in 1901, currently employs nearly 50,000 people and is headquartered in Pittsburgh, Pennsylvania.
Despite recent volatility in the broader markets, the steel sector has exhibited fantastic price action, supported by solid earnings and growth. With day traders and investors alike trying to find the newest momentum plays, steel companies are making fresh 52-week highs almost daily. Obviously, there is a fundamental reason behind the steel rally. For starters, steel plays a critical role in the infrastructural development and overall economy of any developing nation. In fact, between 2000 and 2005, world steel demand increased by 6% a year. And while the most recent consumption figures have yet to be published, it is widely speculated that recent consumption has grown at an even greater rate, along the lines of 10% to 15%. In addition, the price of scrap metal, a key raw material for some steelmakers, has hit record highs and manufacturers are likely to impose steep surcharges to cover the extra costs. The American Metal Market's April scrap index increased to $162 per ton to $555 per ton, a 25% jump higher than the previous record of $443 per ton in November 2004. Six months ago, at the Bureau of International Recycling conference in Warsaw, delegates were told that demand for steel scrap in the United States was firm, with prices at around $300 for shredded and $315/320 for prime scrap. Scrap is the major feedstock for electric arc furnaces operated by mini-mill steelmakers, while integrated steel producers, like U.S. Steel, make their products in blast furnaces which use coking coal to melt iron ore. Coking is the solid carbonaceous material derived from destructive distillation of low-ash, low-sulfur bituminous coal.
Analysts expect U.S. Steel's 2008 revenues to increase 13% to 17%, primarily stemming from acquisitions. Further, distributor inventory levels reached unsustainably low levels in 2007 and the replenishing in 2008 should benefit U.S. Steel. Meanwhile, oil producer country tube/tube-related products should remain strong, and additional steel sector consolidation should help the sector regain modest pricing power. They also have diversified business in relation with their core steel business, making them an attractive and safe investment. U.S. Steel is also involved in a number of other businesses, among them transportation, real estate development, leasing and financial services. With steel imports from China down, and all their steel being consumed there, U.S. manufacturers will have to buy from U.S. makers. If this remains to be the case, stocks like U.S. Steel should be able to benefit greatly from this over the next several months.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Thursday, April 10, 2008
BetterTrades looks at FCStone Group Inc.
FCStone Group Inc. (FCSX), a commodity risk-management firm, announced Thursday that the company’s 2Q earnings rocketed ahead 75% as volatility in global commodity and financial markets drove revenue. The firm’s 2Q earnings surged to $12.1M, or $0.42 per share, from $6.9M, or $0.32 per share, in the prior year. Excluding discontinued operations, earnings totaled $17.8M, or $0.61 per share, compared with $7M, or $0.32 per share, a year ago. Analysts forecasted earnings of $0.37 per share. Quarterly revenues dropped 77% to $92M, from $403.5M in the 2Q of 2007. Adjusted for the impact of commodities sold, revenues totaled $91.2M, compared with $60.1M in the prior year. FCStone attributed the adjusted revenue increase to much higher exchange-traded and over-the-counter volumes, driven by continued volatility in the grain, energy, metals and soft commodity markets. The company also noted higher over-the-counter volumes in energy and renewable fuels, as well as from Brazilian customers. The growth across all market segments of the company is being driven by unprecedented volatility in virtually every commodity and financial market around the world. During a period of tightening credit access, this has fostered an atmosphere which has increased the necessity to manage volatility through conservative risk management services, products, platforms and structures offered by FCStone. The company noted that it booked a $10.8M impairment loss in discontinued operations after canceling the construction and development of a bio-diesel facility in Houston. The company is pursuing an immediate sale of the plant’s assets and inventory. FCStone shares jumped $6.31, or 20.6%, to $36.90 in trading, after closing Wednesday at $30.59. The stock has traded between $18.39 and $53.25 during the past 52 weeks.
FCStone Group, Inc., through its subsidiaries, operates as an integrated commodity risk management company. The company provides risk management consulting and transaction execution services to commercial commodity intermediaries, end-users, and producers in Asia, Latin America, the United States, and Canada. It assists primarily middle market customers in optimizing their profit margins and mitigating their exposure to commodity price risk. FCStone Group operates in four segments: Commodity and Risk Management Services, Clearing and Execution Services, Financial Services, and Grain Merchandising. The Commodity and Risk Management Services segment offers commodity services to its customers with an emphasis on risk management using futures, options, and other derivative instruments. The Clearing and Execution Services segment provides clearing and direct execution services to commodities firms, fund operators, commodities traders, and others. The Financial Services segment serves as a grain financing and facilitation business, and lends to commercial grain-related companies against physical grain inventories. It operates as a financing vehicle for various commodities, including grain, energy products, and renewable fuels. In the Grain Merchandising segment, the company, through its 25% interest in FGDI, LLC, acts as a grain dealer, and links merchandisers of grain products through its network of industry contacts, serving as an intermediary to facilitate the purchase and sale of grain. FCStone Group also markets carbon and other emission credits generated by third parties. The company was founded in 1968, currently employs fewer than 400 people and is headquartered in Kansas City, Missouri.
Although the company has only been public for a few months, some of its clients have been with the firm for over 30 years. On March 16th of 2007, the company raised $122M, selling shares at $24 each compared with a $21 to $24 forecast. On Friday March 23rd, FCSX closed at $34.63, a 31% increase in only seven days. FCSX began as a grain elevator risk management cooperative in 1968. In 2005, FCSX recapitalized from a member-owned cooperative into a stock corporation. As volatility has increased in commodities markets, the company’s business has picked up quickly and the future continues to look bright. The company benefits from increases in volatility and also increases in interest rates. Arguably, these are two forces that should be around for the months and years ahead. FCStone’s customers typically have $5M or more of commodity exposure a year and prefer to outsource the management of this exposure to risk. As volatility increases, more companies are becoming aware of their exposure to price swings and are willing to hire an outside consultant.
The stock is not a cheap name, as very few stocks with good growth prospects are. It trades at 29 times 2008 expectations. If we continue to see rates rising, inflation concerns, and volatility in prices, one can assume that the company will land many new profitable clients and those expectations will likely be proven conservative. The company has grown much of its business organically but is not averse to making acquisitions in order to expand products offered to customers. In the 1Q of this year, management completed an acquisition of Downes O’Neil which significantly increased the company’s presence in the dairy industry. Seasonally the 1Q each year tends to be FCSX's strongest due to the grain harvest. However the rise in derivative transactions the past few years has smoothed this out a bit. Even for a traditionally strong quarter, FCSX the company’s 1Q of 2008 was impressive. OTC contract volume tripled from the same quarter in 2007 while exchange traded volume increased 25%. Revenues were $57M, a whopping 46% increase over the same quarter a year earlier. The stock is trading well in a dismal equity environment. The multiple is high as one would expect from a company with such a growth profile. However, the multiple is not so high as to suggest that the market has an unrealistic view of just how successful the company can be. It seems that institutions wish to own this name as they can be confident that management is meeting current markets with skill and flexibility that should drive long-term stable growth in many different market environments.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
FCStone Group, Inc., through its subsidiaries, operates as an integrated commodity risk management company. The company provides risk management consulting and transaction execution services to commercial commodity intermediaries, end-users, and producers in Asia, Latin America, the United States, and Canada. It assists primarily middle market customers in optimizing their profit margins and mitigating their exposure to commodity price risk. FCStone Group operates in four segments: Commodity and Risk Management Services, Clearing and Execution Services, Financial Services, and Grain Merchandising. The Commodity and Risk Management Services segment offers commodity services to its customers with an emphasis on risk management using futures, options, and other derivative instruments. The Clearing and Execution Services segment provides clearing and direct execution services to commodities firms, fund operators, commodities traders, and others. The Financial Services segment serves as a grain financing and facilitation business, and lends to commercial grain-related companies against physical grain inventories. It operates as a financing vehicle for various commodities, including grain, energy products, and renewable fuels. In the Grain Merchandising segment, the company, through its 25% interest in FGDI, LLC, acts as a grain dealer, and links merchandisers of grain products through its network of industry contacts, serving as an intermediary to facilitate the purchase and sale of grain. FCStone Group also markets carbon and other emission credits generated by third parties. The company was founded in 1968, currently employs fewer than 400 people and is headquartered in Kansas City, Missouri.
Although the company has only been public for a few months, some of its clients have been with the firm for over 30 years. On March 16th of 2007, the company raised $122M, selling shares at $24 each compared with a $21 to $24 forecast. On Friday March 23rd, FCSX closed at $34.63, a 31% increase in only seven days. FCSX began as a grain elevator risk management cooperative in 1968. In 2005, FCSX recapitalized from a member-owned cooperative into a stock corporation. As volatility has increased in commodities markets, the company’s business has picked up quickly and the future continues to look bright. The company benefits from increases in volatility and also increases in interest rates. Arguably, these are two forces that should be around for the months and years ahead. FCStone’s customers typically have $5M or more of commodity exposure a year and prefer to outsource the management of this exposure to risk. As volatility increases, more companies are becoming aware of their exposure to price swings and are willing to hire an outside consultant.
The stock is not a cheap name, as very few stocks with good growth prospects are. It trades at 29 times 2008 expectations. If we continue to see rates rising, inflation concerns, and volatility in prices, one can assume that the company will land many new profitable clients and those expectations will likely be proven conservative. The company has grown much of its business organically but is not averse to making acquisitions in order to expand products offered to customers. In the 1Q of this year, management completed an acquisition of Downes O’Neil which significantly increased the company’s presence in the dairy industry. Seasonally the 1Q each year tends to be FCSX's strongest due to the grain harvest. However the rise in derivative transactions the past few years has smoothed this out a bit. Even for a traditionally strong quarter, FCSX the company’s 1Q of 2008 was impressive. OTC contract volume tripled from the same quarter in 2007 while exchange traded volume increased 25%. Revenues were $57M, a whopping 46% increase over the same quarter a year earlier. The stock is trading well in a dismal equity environment. The multiple is high as one would expect from a company with such a growth profile. However, the multiple is not so high as to suggest that the market has an unrealistic view of just how successful the company can be. It seems that institutions wish to own this name as they can be confident that management is meeting current markets with skill and flexibility that should drive long-term stable growth in many different market environments.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Wednesday, April 09, 2008
BetterTrades looks at Lockheed Martin Corp.
The U.S. Army has awarded the Lockheed Martin Corporation (LMT) a Performance Based Logistics (PBL) follow-on contract to support the Target Acquisition Designation Sight/Pilot Night Vision Sensor (TADS/PNVS) and Modernized TADS/PNVS (M-TADS/PNVS) systems on the AH-64 Apache helicopter. The contract has a potential value of $76.6M for 2008. The original PBL contract, awarded in early 2007, established a system of continuous improvements supporting the AH-64 Apache TADS/PNVS and M-TADS/PNVS programs. The PBL contract provides complete post-production supply chain management, including spares planning, procurement, repairs, maintenance, modifications and inventory management of fielded systems. The value of the first year of the contract was $117.8M. In regard to Department of Defense contracting, PBL is a strategy for weapon system product support that employs an integrated, affordable performance package designed to optimize system readiness. PBL is intended to save operating and support costs by having the prime contractor assume responsibility for total performance of a system. The PBL program shortens the length of the supply pipeline, enabling the U.S. Army to receive spare parts more quickly. The more efficient the supply management is, the more it reduces operation and support cost burdens, providing funds for continuing system modernization and reliability improvements. To date, the Apache PBL program has been credited with improving fleet readiness, requisition fills, reducing the average flying-hour cost and the U.S. Army's long term inventory investment.
Lockheed Martin Corporation researches, designs, develops, manufactures, integrates, operates, and sustains technology systems and products, as well as provides a range of management, engineering, technical, scientific, logistic, and information services in the United States and internationally. Its Aeronautics segment provides military aircraft, air vehicles, and related technologies. This segment's products and programs include the F-35 Joint Strike Fighter, the F-22 air dominance attack and multi-mission combat aircraft, the F-16 multi-role fighter, the C-130J tactical transport aircraft, and the C-5 strategic airlift aircraft. It also supports the F-117 stealth fighter, P-3 maritime patrol aircraft, S-3 multi-mission aircraft, and U-2 high-altitude reconnaissance aircraft; produces components for the F-2 fighter; and serves as a co-developer of the T-50 jet trainer. The company's Electronic Systems segment offers tactical missiles and weapon fire control systems; air and sea-based missile defense systems; surface ship and submarine combat systems; anti-submarine and undersea warfare systems; ground combat vehicle integration; avionics, systems integration, and program management for fixed and rotary-wing aircraft systems; radars; surveillance and reconnaissance systems; and simulation and training systems. Its Information Systems & Global Services segment provides federal services; information technology solutions; software and systems engineering support services; logistics, mission operations support, peacekeeping, and nation-building services for various U.S. defense and civil government agencies in the U.S. and internationally. The company's Space Systems segment offers government and commercial satellites; strategic and defensive missile systems, including missile defense technologies and systems, and fleet ballistic missiles; and space transportation systems. Lockheed Martin Corporation was founded in 1909, currently employs over 140,000 people and is based in Bethesda, Maryland.
Although analysts in December and throughout January said that aerospace and defense were a favored sector in 2008, investors took the opportunity to sell into the eight-year rally. Meanwhile, the underlying core positive trends influencing the sector continued to hold steady as the aerospace and defense companies posted across-the-board positive quarterly earnings. In the company’s most recent earnings report, Lockheed posted a 4Q profit of $799M, or $1.89 per share, compared to a year-earlier profit of $729M, or $1.68 per share. However, net sales were flat at $10.84B, while analysts had expected earnings of $1.69 per share on sales of $10.73B. For all of 2007, Lockheed earned $3B, or $7.10 per share on revenues of $41.9B. Like other defense contractors, Lockheed has seen its earnings soar in recent years behind big spending increases at the Pentagon on weapons programs. Its fighter jet and other long term projects also make it somewhat immune to any troop withdrawals or shifts in U.S. military strategy in places like Iraq. The fiscal year 2009 budget is a record high for a single year excluding inflation. If we exclude 2008 which includes supplemental spending, the core budget from 2009 to 2013 shows that the defense budget is forecast to grow by an additional $33.5B, although the rate of growth has slowed. These figures are pretty much inline with what analysts expected.
The defense sector is inherently cyclical and also in the sub-sectors to which the defense department is allocating resources. At various times during its current eight-year run, there has been shifts as to which companies were in favor, rotating among large systems contractors, war-equipment suppliers, electronic devices manufacturers, information technology and network centric warfare programmers, and those involved with armor and systems, homeland security, etc. But looking in the near future for a top performer in 2008, Lockheed Martin will remain in the forefront as the demand for new aircraft systems, information sharing, persistent surveillance, missile defense, enhanced situational awareness, navigation, advanced sensors, government services, and networked communications. Lockheed Martin will also increase its share buyback by an additional 20 million shares, on top of the 20 million shares remaining from its prior board authorization. The firm has been buying back shares since October 2002 and repurchased 92.1 million shares through 2007. As of today, approximately 408 million shares of common stock remain on the balance sheet. It is worth considering that if congress approves the recently proposed defense spending plan, which calls for tens of billions of increased spending, it should spread massive amounts of dollars whose effect could go a long way in avoiding a recession. Moreover, investors are beginning to look for investments that are not elastic to the broader market concerns surrounding the consumer, energy prices, sub-prime exposure, and housing problems. Given the current valuations, fundamentals, and lack of a fundamental correlation to the overall market, the government services group can outperform the broader markets in 2008. The company raised its forecast for 2008 earnings per share to a range of $7.05 per share to $7.25 per share, from a range of $6.95 to $7.15 previously with analysts expecting earnings of $7.29 per share for the year.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Lockheed Martin Corporation researches, designs, develops, manufactures, integrates, operates, and sustains technology systems and products, as well as provides a range of management, engineering, technical, scientific, logistic, and information services in the United States and internationally. Its Aeronautics segment provides military aircraft, air vehicles, and related technologies. This segment's products and programs include the F-35 Joint Strike Fighter, the F-22 air dominance attack and multi-mission combat aircraft, the F-16 multi-role fighter, the C-130J tactical transport aircraft, and the C-5 strategic airlift aircraft. It also supports the F-117 stealth fighter, P-3 maritime patrol aircraft, S-3 multi-mission aircraft, and U-2 high-altitude reconnaissance aircraft; produces components for the F-2 fighter; and serves as a co-developer of the T-50 jet trainer. The company's Electronic Systems segment offers tactical missiles and weapon fire control systems; air and sea-based missile defense systems; surface ship and submarine combat systems; anti-submarine and undersea warfare systems; ground combat vehicle integration; avionics, systems integration, and program management for fixed and rotary-wing aircraft systems; radars; surveillance and reconnaissance systems; and simulation and training systems. Its Information Systems & Global Services segment provides federal services; information technology solutions; software and systems engineering support services; logistics, mission operations support, peacekeeping, and nation-building services for various U.S. defense and civil government agencies in the U.S. and internationally. The company's Space Systems segment offers government and commercial satellites; strategic and defensive missile systems, including missile defense technologies and systems, and fleet ballistic missiles; and space transportation systems. Lockheed Martin Corporation was founded in 1909, currently employs over 140,000 people and is based in Bethesda, Maryland.
Although analysts in December and throughout January said that aerospace and defense were a favored sector in 2008, investors took the opportunity to sell into the eight-year rally. Meanwhile, the underlying core positive trends influencing the sector continued to hold steady as the aerospace and defense companies posted across-the-board positive quarterly earnings. In the company’s most recent earnings report, Lockheed posted a 4Q profit of $799M, or $1.89 per share, compared to a year-earlier profit of $729M, or $1.68 per share. However, net sales were flat at $10.84B, while analysts had expected earnings of $1.69 per share on sales of $10.73B. For all of 2007, Lockheed earned $3B, or $7.10 per share on revenues of $41.9B. Like other defense contractors, Lockheed has seen its earnings soar in recent years behind big spending increases at the Pentagon on weapons programs. Its fighter jet and other long term projects also make it somewhat immune to any troop withdrawals or shifts in U.S. military strategy in places like Iraq. The fiscal year 2009 budget is a record high for a single year excluding inflation. If we exclude 2008 which includes supplemental spending, the core budget from 2009 to 2013 shows that the defense budget is forecast to grow by an additional $33.5B, although the rate of growth has slowed. These figures are pretty much inline with what analysts expected.
The defense sector is inherently cyclical and also in the sub-sectors to which the defense department is allocating resources. At various times during its current eight-year run, there has been shifts as to which companies were in favor, rotating among large systems contractors, war-equipment suppliers, electronic devices manufacturers, information technology and network centric warfare programmers, and those involved with armor and systems, homeland security, etc. But looking in the near future for a top performer in 2008, Lockheed Martin will remain in the forefront as the demand for new aircraft systems, information sharing, persistent surveillance, missile defense, enhanced situational awareness, navigation, advanced sensors, government services, and networked communications. Lockheed Martin will also increase its share buyback by an additional 20 million shares, on top of the 20 million shares remaining from its prior board authorization. The firm has been buying back shares since October 2002 and repurchased 92.1 million shares through 2007. As of today, approximately 408 million shares of common stock remain on the balance sheet. It is worth considering that if congress approves the recently proposed defense spending plan, which calls for tens of billions of increased spending, it should spread massive amounts of dollars whose effect could go a long way in avoiding a recession. Moreover, investors are beginning to look for investments that are not elastic to the broader market concerns surrounding the consumer, energy prices, sub-prime exposure, and housing problems. Given the current valuations, fundamentals, and lack of a fundamental correlation to the overall market, the government services group can outperform the broader markets in 2008. The company raised its forecast for 2008 earnings per share to a range of $7.05 per share to $7.25 per share, from a range of $6.95 to $7.15 previously with analysts expecting earnings of $7.29 per share for the year.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Tuesday, April 08, 2008
BetterTrades looks at Seaspan Corporation
A Wachovia Capital Markets analyst upgraded Seaspan Corporation (SSW) to "Outperform" from "Market Perform" on Tuesday, saying shares of the container ship company are poised to rebound after Monday's public stock offering. On Monday, Hong Kong-based Seaspan offered 7 million shares for sale to raise about $193.9M. It also said that certain executives will buy about $18.1M in shares from the company. The subsequent decline in price, shares fell $0.86, or 3%, to close at $28.06 Monday, was a minimal dilution in value, with the stock likely to bounce back. Expect Seaspan to use the public offering to make final payments for six vessels delivered in 2008 and additional vessels in early 2009. Per-share earnings estimates in the wake of the sale have been lowered to $1.18 from $1.21 for fiscal 2008 and to $1.44 from $1.54 for fiscal 2009. In additional, yet unrelated news, Seaspan Corporation announced last Friday that the company had entered into a credit agreement for a term loan facility in the amount of $235.3M to finance the acquisition of two of its previously acquired 13100 TEU (twenty-foot equivalent unit) vessels. The facility has been fully underwritten by Sumitomo Mitsui Banking Corporation at a weighted average rate of 0.70% over the London Interbank Offer Rate (LIBOR). Since January of 2007, Seaspan has raised more than $2.2B of debt at a weighted average margin of less than 0.60% in support of its strong growth initiatives.
Seaspan Corporation, incorporated on May 3, 2005 and is based in Hong Kong, Hong Kong., is engaged in the business of owning and chartering containerships pursuant to long-term, fixed-rate charters to container lines. During the year Ended December 31, 2007, the Company owned and operated a fleet of 29 containerships. Customers for its operating fleet include China Shipping Container Lines (Asia) Co., Ltd. (CSCL Asia), Hapag-Lloyd USA, LLC (HL USA) and A.P. Moller-Maersk A/S (APM). The average age of the 29 vessels in its fleet is 4.7 years. Seaspan has a range of containerships with different capacities, including 9600 twenty-foot equivalent unit (TEU) class vessels, 8500 TEU class vessels, 5100 TEU class vessels, 4800 TEU class vessels, 4250 TEU class vessels, 3500 TEU class vessels and 2500 TEU class vessels. Seaspan has entered into contracts for the purchase of an additional 34 containerships and to lease an additional five containerships. Customers for the additional 39 vessels include Mitsui O.S.K. Lines, Ltd (MOL), Kawasaki Kisen Kaisha Ltd., (K-Line), Compania Sud Americana De Vapores S.A., (CSAV), CSCL Asia and COSCON. Each of the vessels in its fleet is subject to a long-term time charter. Of these, 14 containerships are subject to charters with CSCL Asia; nine are subject to charters with HL USA, a subsidiary of Hapag-Lloyd; four vessels are subject to charters with APM, and two vessels are subject to time charters with COSCON.
Continuing a pattern of growth with double-digit annual gains, container shipping may be the most stable sector in the shipping arena. With container space and demand in better balance, shipping rates in this sub-space are exhibiting above-trend pricing and admirable stability. The more excitable dry bulk market, where watchers are competing to be the first to sight the second coming of last year’s breakneck race by China, in order to ship much of the world’s iron, coal and cement to the rapidly expanding economic power. China accounts for 1/3 of the global shipping trade. The first to lease ships, Seaspan has expanded its fleet of 55 ships worth $3.9B, from 23 ships, worth $1.5B, at its 2005 IPO. Seaspan anticipates 100 ships at a $7B to $10B value by 2010 through its geographically expanded client base, to hedge against China's frothy market along with its sharp management, which orders new ships after pre-signing, steady-yield leasing agreements and arranging staggered contract renewals, which allows safe expansion and hedging against the cyclicality of the shipping trade.
After pulling back since late-October with the rest of the shipping sector over economic slowdown fears, the stock has shown strong relative strength compared to its group and even looks to be firming up, technically. A move to $30 would mark the second double-top in a row, giving more confidence of a change in trend for the better. The other positive that the company possesses is that they have a 6.7% dividend yield and based on projected revenues, that yield should increase in the near future. Bulls expect global trade expansion to allow a 10% dividend hike in both 2009 and 2010. SSW is structured as a REIT and thus must pay out most of its income in order to avoid corporate taxes. Growth in the liner shipping market has been relatively rapid in comparison with other major shipping sectors such as tankers and bulk carriers. In terms of loaded containers moved from origin to destination, estimated global container trade increased on a compounded average annual growth rate of 9.5%. In the last three years demand for container shipping has accelerated strongly, with estimated growth in world container trade reaching 11.6% in 2008, 13.4% in 2009 and 10.1% in 2010.
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Seaspan Corporation, incorporated on May 3, 2005 and is based in Hong Kong, Hong Kong., is engaged in the business of owning and chartering containerships pursuant to long-term, fixed-rate charters to container lines. During the year Ended December 31, 2007, the Company owned and operated a fleet of 29 containerships. Customers for its operating fleet include China Shipping Container Lines (Asia) Co., Ltd. (CSCL Asia), Hapag-Lloyd USA, LLC (HL USA) and A.P. Moller-Maersk A/S (APM). The average age of the 29 vessels in its fleet is 4.7 years. Seaspan has a range of containerships with different capacities, including 9600 twenty-foot equivalent unit (TEU) class vessels, 8500 TEU class vessels, 5100 TEU class vessels, 4800 TEU class vessels, 4250 TEU class vessels, 3500 TEU class vessels and 2500 TEU class vessels. Seaspan has entered into contracts for the purchase of an additional 34 containerships and to lease an additional five containerships. Customers for the additional 39 vessels include Mitsui O.S.K. Lines, Ltd (MOL), Kawasaki Kisen Kaisha Ltd., (K-Line), Compania Sud Americana De Vapores S.A., (CSAV), CSCL Asia and COSCON. Each of the vessels in its fleet is subject to a long-term time charter. Of these, 14 containerships are subject to charters with CSCL Asia; nine are subject to charters with HL USA, a subsidiary of Hapag-Lloyd; four vessels are subject to charters with APM, and two vessels are subject to time charters with COSCON.
Continuing a pattern of growth with double-digit annual gains, container shipping may be the most stable sector in the shipping arena. With container space and demand in better balance, shipping rates in this sub-space are exhibiting above-trend pricing and admirable stability. The more excitable dry bulk market, where watchers are competing to be the first to sight the second coming of last year’s breakneck race by China, in order to ship much of the world’s iron, coal and cement to the rapidly expanding economic power. China accounts for 1/3 of the global shipping trade. The first to lease ships, Seaspan has expanded its fleet of 55 ships worth $3.9B, from 23 ships, worth $1.5B, at its 2005 IPO. Seaspan anticipates 100 ships at a $7B to $10B value by 2010 through its geographically expanded client base, to hedge against China's frothy market along with its sharp management, which orders new ships after pre-signing, steady-yield leasing agreements and arranging staggered contract renewals, which allows safe expansion and hedging against the cyclicality of the shipping trade.
After pulling back since late-October with the rest of the shipping sector over economic slowdown fears, the stock has shown strong relative strength compared to its group and even looks to be firming up, technically. A move to $30 would mark the second double-top in a row, giving more confidence of a change in trend for the better. The other positive that the company possesses is that they have a 6.7% dividend yield and based on projected revenues, that yield should increase in the near future. Bulls expect global trade expansion to allow a 10% dividend hike in both 2009 and 2010. SSW is structured as a REIT and thus must pay out most of its income in order to avoid corporate taxes. Growth in the liner shipping market has been relatively rapid in comparison with other major shipping sectors such as tankers and bulk carriers. In terms of loaded containers moved from origin to destination, estimated global container trade increased on a compounded average annual growth rate of 9.5%. In the last three years demand for container shipping has accelerated strongly, with estimated growth in world container trade reaching 11.6% in 2008, 13.4% in 2009 and 10.1% in 2010.
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Monday, April 07, 2008
BetterTrades looks at Southwestern Energy Co.
Oil and natural gas production company Southwestern Energy Co. (SWN) on Monday reaffirmed its production forecast for 2008, citing continued investments in its Fayetteville Shale operations in Arkansas. The company still expects to produce 148 billion to 152 billion cubic feet of oil equivalent this year, representing an increase of 30% to 35% over 2007. In related news which took place last week, a subsidiary of Southwestern Energy Co. has agreed to sell some of its oil and gas assets to XTO Energy Inc. (XTO) for about $519.6M. The sale includes 55,631 acres, or about 6% of the Houston natural gas company's holdings, in the Fayetteville Shale in northeastern Arkansas, where Southwestern is the primary operator with about 906,700 acres as of Dec. 31, 2007. Southwestern said the deal was in line with its focus on divesting assets to fund its capital program. The acquisition is set to close by May 5. XTO said it plans to fund the acquisition through a combination of cash and borrowings.
Southwestern Energy Company, an independent energy company, engages in the exploration for and production of natural gas in the United States. It operates in three segments: Exploration and Production, Midstream Services, and Natural Gas Distribution. The Exploration and Production segment engages in the exploration, development, and production of natural gas and oil in the United States. This segment also engages in conventional drilling programs in the Arkansas part of the Arkoma Basin; and conducts development drilling and exploration programs in the Oklahoma portion of the Arkoma Basin and in Texas, as well as operates drilling rigs in the Fayetteville Shale play and in East Texas. Midstream Services segment engages in the marketing of its own gas production, as well as third-party natural gas; and transportation of natural gas. The Natural Gas Distribution segment operates integrated natural gas distribution systems in northern Arkansas serving approximately 152,000 retail customers. As of December 31, 2007, the company's estimated proved natural gas and oil reserves were approximately 1,450 billion cubic feet (Bcfe) of gas. The company was founded in 1929, currently employs just over 1,500 workers and is headquartered in Houston, Texas.
The dark days for South West Energy were the late 1990s and early 2000s when it lost a major law suit over a gas contract that put it heavily into debt. These days, the key is its involvement in the Fayetteville Shale play in Arkansas. Southwest expects that the company will get reserves of 2B to 2.5B cubic feet of natural gas for each well there, while last year, the company was forecasting reserves that was in the range of 1.3B to 1.5B cubic feet. In its most recent earnings report, released at the end of February, the company provided excellent numbers which beat analyst’s expectation. SWN doubled its profits in the 4Q and set a 2:1 stock split as the natural gas producer capped off a month of big gains in its stock price. Net income in the period increased to $71.6M, or $0.41 a share, more than twice the $33.8M, or $0.20 a share, it posted a year ago. The company said most of the gains came from a 68% increase in oil and gas production and higher energy prices. Revenues, meanwhile, climbed to $402.7M from $214M, a nearly 47% increase.
With shale production continuing to grow, expectation of average initial production rates continuing to improve, and a good possibility of more strong initial production results in weekly filings, the company believes that the positive news flow will continue in the near future. In fact, the Fayetteville Shale production numbers increased from 32 million cubic feet of gas per day (Mmcfgpd) in 2006 to 147 Mmcfgpd in 2007. This accounted for nearly half of the company’s total production. Gross production tripled from 100 Mmcfgpd at the beginning of the year to 325 Mmcfgpd by the end of 2007. As of mid-February, gross production from this site was at 350 Mmcfgpd. These are very good results both for the 4Q and the year-end results, along with a positive guidance for 2008. Costs remain in check for the company and the potential for upsizing reserves and production from the Fayetteville Shale certainly exist as the company transitions these wells from a science project to major resource development.
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Southwestern Energy Company, an independent energy company, engages in the exploration for and production of natural gas in the United States. It operates in three segments: Exploration and Production, Midstream Services, and Natural Gas Distribution. The Exploration and Production segment engages in the exploration, development, and production of natural gas and oil in the United States. This segment also engages in conventional drilling programs in the Arkansas part of the Arkoma Basin; and conducts development drilling and exploration programs in the Oklahoma portion of the Arkoma Basin and in Texas, as well as operates drilling rigs in the Fayetteville Shale play and in East Texas. Midstream Services segment engages in the marketing of its own gas production, as well as third-party natural gas; and transportation of natural gas. The Natural Gas Distribution segment operates integrated natural gas distribution systems in northern Arkansas serving approximately 152,000 retail customers. As of December 31, 2007, the company's estimated proved natural gas and oil reserves were approximately 1,450 billion cubic feet (Bcfe) of gas. The company was founded in 1929, currently employs just over 1,500 workers and is headquartered in Houston, Texas.
The dark days for South West Energy were the late 1990s and early 2000s when it lost a major law suit over a gas contract that put it heavily into debt. These days, the key is its involvement in the Fayetteville Shale play in Arkansas. Southwest expects that the company will get reserves of 2B to 2.5B cubic feet of natural gas for each well there, while last year, the company was forecasting reserves that was in the range of 1.3B to 1.5B cubic feet. In its most recent earnings report, released at the end of February, the company provided excellent numbers which beat analyst’s expectation. SWN doubled its profits in the 4Q and set a 2:1 stock split as the natural gas producer capped off a month of big gains in its stock price. Net income in the period increased to $71.6M, or $0.41 a share, more than twice the $33.8M, or $0.20 a share, it posted a year ago. The company said most of the gains came from a 68% increase in oil and gas production and higher energy prices. Revenues, meanwhile, climbed to $402.7M from $214M, a nearly 47% increase.
With shale production continuing to grow, expectation of average initial production rates continuing to improve, and a good possibility of more strong initial production results in weekly filings, the company believes that the positive news flow will continue in the near future. In fact, the Fayetteville Shale production numbers increased from 32 million cubic feet of gas per day (Mmcfgpd) in 2006 to 147 Mmcfgpd in 2007. This accounted for nearly half of the company’s total production. Gross production tripled from 100 Mmcfgpd at the beginning of the year to 325 Mmcfgpd by the end of 2007. As of mid-February, gross production from this site was at 350 Mmcfgpd. These are very good results both for the 4Q and the year-end results, along with a positive guidance for 2008. Costs remain in check for the company and the potential for upsizing reserves and production from the Fayetteville Shale certainly exist as the company transitions these wells from a science project to major resource development.
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Friday, April 04, 2008
BetterTrades looks at Monsanto Company
Seed Company Monsanto Co. (MON) announced earlier this week that the company’s 2Q earnings more than doubled on increasingly strong sales of corn seed and herbicide in the United States. But the company's profit forecast for 2008 appeared to disappoint Wall Street as the company's shares slipped in trading that day. Monsanto earned $1.13B, or $2.02 per share, from $543M, or $0.98 per share, in the prior year. Its revenue jumped 45% to $3.8B from $2.6B in the prior-year period. The company said corn seed sales were a standout during the quarter, jumping to $1.7B from $1.2B during the same period a year before. The results surpassed the expectations of analysts who predicted earnings of $1.72 per share. For the first half of the fiscal year, Monsanto earned $1.39B, or $2.48 a share, up from $633M, or $1.14 a share, a year earlier. Six-month revenues increased to $5.88B from $4.15B. The company forecasts 2008 profits of between $3.15 and $3.25 a share on an ongoing basis. Analysts are predicting earnings of $3.20 a share. Monsanto's shares fell $0.96, or 0.8%, to $112.00 in Wednesday’s trading after falling as low as $105.84 earlier in the session. Monsanto attributed the sales growth to increases in corn seed and traits revenue in the U.S., as well as higher sales of Roundup and similar herbicides in North America, Europe and Africa. Between now and 2012, Monsanto is the only agriculture company that can point to consistent growth irrespective of commodity price swings, fluctuations in planted acres or the popularity of ethanol. Over the next five years the company is poised to set the bar higher as they deliver a game changing platform every other year, real products that create real value for the farmer and for the shareowners. Monsanto earned $1.79 per share in its last fiscal year ended Aug. 31st. Monsanto aims to double its gross profit potential by the end of 2012. It plans to do that by focusing on corn, soybeans, cotton and vegetable seeds. Prices for commodities like corn have surged due to strong global food demand, the ethanol industry and a weak dollar.
Monsanto Company, together with its subsidiaries, provides agricultural products for farmers principally in the United States. It operates in two segments, Seeds and Genomics, and Agricultural Productivity. The Seeds and Genomics segment produces corn, soybeans, canola, and cotton seeds, as well as vegetable and fruit seeds, including tomato, pepper, eggplant, melon, cucumber, pumpkin, squash, beans, broccoli, onions, and lettuce. This segment also develops biotechnology traits that assist farmers in controlling insects and weeds, as well as provide genetic material and biotechnology traits to other seed companies for their seed brands. The Agricultural Productivity segment manufactures glyphosate-based, acetanilide-based, and other selective herbicides; lawn-and-garden herbicides for residential lawn-and-garden applications; and bovine somatotropin to increase efficiency of milk production in dairy cows. The company offers its products under the Roundup Ready, YieldGard, Agroceres, Asgrow, DEKALB, D&PL, Deltapine, Vistive, Seminis, Royal Sluis, Petoseed, Posilac, and Bollgard and Bollgard II brand names. It also licenses germplasm and trait technologies to seed companies in the United States and international markets. The company sells its products through distributors, independent retailers, dealers, agricultural co-operatives, plant raisers, and agents to farmers, agricultural chemical producers, and dairy farmers. Monsanto Company has a joint venture with Cargill, Incorporated to commercialize a proprietary grain processing technology under the name Extrax, as well as has a research and development collaboration with BASF in plant biotechnology that focuses on high-yielding crops and crops that are tolerant to adverse conditions, such as drought. The company was founded in 2000, currently employs nearly 19,000 people and is based in St. Louis, Missouri.
Monsanto's stock has slipped 25% from highs reached earlier this year, as investors have noticed that farmers are devoting less planting space to corn, and focusing more on soybeans and spring wheat. Last year, corn prices surged on strong demand for ethanol and exports. Now, other commodities like soybeans have seen rising prices, as well. Also, a UBS analyst upgraded the seed maker to "Buy" and said a pullback in the stock price has made shares an even better value. The company delivered a strong fiscal 1Q in early January. Total net sales increased by 36% on a year-over-year basis. 1Q earnings per share of $0.46 surged past the previous year’s $0.16 and eclipsed the consensus estimate by 31%. Monsanto’s track record of beating analyst estimates is outstanding. The company posted only two earnings misses and one match since March of 2003, while outperforming expectations all the other times. The company noted that its results in the 1Q represents a solid start to the fiscal year and highlights the strong performance of its Latin American business. With the most significant part of its annual business cycle still to come, MON believes these results position the company for another strong fiscal year for its business.
In early January, the company stated that there is substantial progress and momentum behind its research-and-development (R&D) pipeline. It is poised to deliver several new blockbuster products to farmers by 2012. In late February, MON announced that it will be able to add between $0.22 and $0.24 a share to its 2Q earnings as its former chemical business, Solutia, emerges from bankruptcy. Monsanto’s last quarterly dividend was in the amount of $0.175 per share and the dividend yield of 0.6% is outperforming the industry. Wall Street remains bullish on MON. Earnings forecasts of $2.81 per share for the year ending August 2008 are above the one month-ago estimates of $2.76. The most accurate estimate is a more bullish $3.00 per share. The company’s earnings per share are expected to grow by 19% over the next 3 to 5 years, while the industry’s expectation stands at 11%. Growth is also evident in its net profit margin of 12.7%, versus the industry’s average of 5.3%, and Monsanto’s Return on Equity (ROE) of 16% signals growth and surpasses the industry average of 15%. The fundamentals of Monsanto’s business have never been stronger and that the debate around the potential switch of corn acres back to soybean acres in the U.S. has been entirely misconstrued.
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Monsanto Company, together with its subsidiaries, provides agricultural products for farmers principally in the United States. It operates in two segments, Seeds and Genomics, and Agricultural Productivity. The Seeds and Genomics segment produces corn, soybeans, canola, and cotton seeds, as well as vegetable and fruit seeds, including tomato, pepper, eggplant, melon, cucumber, pumpkin, squash, beans, broccoli, onions, and lettuce. This segment also develops biotechnology traits that assist farmers in controlling insects and weeds, as well as provide genetic material and biotechnology traits to other seed companies for their seed brands. The Agricultural Productivity segment manufactures glyphosate-based, acetanilide-based, and other selective herbicides; lawn-and-garden herbicides for residential lawn-and-garden applications; and bovine somatotropin to increase efficiency of milk production in dairy cows. The company offers its products under the Roundup Ready, YieldGard, Agroceres, Asgrow, DEKALB, D&PL, Deltapine, Vistive, Seminis, Royal Sluis, Petoseed, Posilac, and Bollgard and Bollgard II brand names. It also licenses germplasm and trait technologies to seed companies in the United States and international markets. The company sells its products through distributors, independent retailers, dealers, agricultural co-operatives, plant raisers, and agents to farmers, agricultural chemical producers, and dairy farmers. Monsanto Company has a joint venture with Cargill, Incorporated to commercialize a proprietary grain processing technology under the name Extrax, as well as has a research and development collaboration with BASF in plant biotechnology that focuses on high-yielding crops and crops that are tolerant to adverse conditions, such as drought. The company was founded in 2000, currently employs nearly 19,000 people and is based in St. Louis, Missouri.
Monsanto's stock has slipped 25% from highs reached earlier this year, as investors have noticed that farmers are devoting less planting space to corn, and focusing more on soybeans and spring wheat. Last year, corn prices surged on strong demand for ethanol and exports. Now, other commodities like soybeans have seen rising prices, as well. Also, a UBS analyst upgraded the seed maker to "Buy" and said a pullback in the stock price has made shares an even better value. The company delivered a strong fiscal 1Q in early January. Total net sales increased by 36% on a year-over-year basis. 1Q earnings per share of $0.46 surged past the previous year’s $0.16 and eclipsed the consensus estimate by 31%. Monsanto’s track record of beating analyst estimates is outstanding. The company posted only two earnings misses and one match since March of 2003, while outperforming expectations all the other times. The company noted that its results in the 1Q represents a solid start to the fiscal year and highlights the strong performance of its Latin American business. With the most significant part of its annual business cycle still to come, MON believes these results position the company for another strong fiscal year for its business.
In early January, the company stated that there is substantial progress and momentum behind its research-and-development (R&D) pipeline. It is poised to deliver several new blockbuster products to farmers by 2012. In late February, MON announced that it will be able to add between $0.22 and $0.24 a share to its 2Q earnings as its former chemical business, Solutia, emerges from bankruptcy. Monsanto’s last quarterly dividend was in the amount of $0.175 per share and the dividend yield of 0.6% is outperforming the industry. Wall Street remains bullish on MON. Earnings forecasts of $2.81 per share for the year ending August 2008 are above the one month-ago estimates of $2.76. The most accurate estimate is a more bullish $3.00 per share. The company’s earnings per share are expected to grow by 19% over the next 3 to 5 years, while the industry’s expectation stands at 11%. Growth is also evident in its net profit margin of 12.7%, versus the industry’s average of 5.3%, and Monsanto’s Return on Equity (ROE) of 16% signals growth and surpasses the industry average of 15%. The fundamentals of Monsanto’s business have never been stronger and that the debate around the potential switch of corn acres back to soybean acres in the U.S. has been entirely misconstrued.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Wednesday, April 02, 2008
BetterTrades looks at Deere & Company
Deere & Company (DE) today announced plans to significantly expand its presence in Russia, one of the most important growth markets of the company in both agriculture and forestry. Deere said it has signed an agreement with the Russian government and local authorities to invest approximately $80M in a central operations center which includes a distribution, replacement parts and training facility in the Kaluga region, 38 miles southwest of Moscow. In its initial stage, the new 98-acre facility in the Kaluga region will accommodate a 322,000-square-foot replacement parts distribution center, a training facility for dealer personnel, including a product demonstration site, and a whole goods distribution facility. John Deere has a long history of agricultural and forestry equipment sales to Russia. In the late 1920s, the company sold a significant number of plows and its famous Waterloo Boy tractors in Russia. The forestry markets have been served in Russia for over 30 years. In 2002 Deere opened a forestry sales branch in Saint Petersburg. In 2003, the company established an agricultural sales branch office in Moscow, which currently supervises a network of 13 dealers in Russia's most important agricultural regions. In 2005, Deere added a manufacturing and assembly facility for seeding equipment in Orenburg. This new facility in Kaluga added significant value to their customers. It also enhanced their spare parts supply, provided upgraded training facilities and appropriately reflected the company’s commitment to this important and rapidly expanding market.
Deere & Company engages in the manufacture and distribution of products and services for agriculture and forestry worldwide. It operates in four segments: Agricultural Equipment, Commercial and Consumer Equipment, Construction and Forestry, and Credit. The Agricultural Equipment segment offers a line of farm equipment and related service parts, including tractors; combine, cotton, and sugarcane harvesters; tillage, seeding, and soil preparation machinery; sprayers; hay and forage equipment; integrated agricultural management systems technology; and precision agricultural irrigation equipment. The Commercial and Consumer Equipment segment provides equipment, products, and service parts for commercial and residential uses, such as tractors for lawn, garden, commercial, and utility purposes; mowing equipment, including walk-behind mowers; golf course equipment; utility vehicles; landscape and nursery products; irrigation equipment; and other outdoor power products. The Construction and Forestry segment offers a range of machines and service parts used in construction, earthmoving, material handling, and timber harvesting, including backhoe loaders; crawler dozers and loaders; four-wheel-drive loaders; excavators; motor graders; articulated dump trucks; landscape loaders; skid-steer loaders; and log skidders, feller bunchers, log loaders, log forwarders, log harvesters, and related attachments. Its products and services are marketed primarily through independent retail dealer networks and retail outlets. The Credit segment primarily finances sales and leases by dealers of new and used agricultural, commercial and consumer, and construction and forestry equipment. It also provides wholesale financing to dealers of the foregoing equipment, provides operating loans, finances retail revolving charge accounts, offers certain crop risk mitigation products, and invests in wind energy generation. The company was founded in 1837, currently employs more than 52,000 workers and is based in Moline, Illinois.
U.S. heavy-equipment makers have taken refuge in growing economies overseas to ride out the downturn in the American economy. Growing economies abroad have kept American-made industrial and agricultural heavy equipment moving in China, India, the Middle East and elsewhere, even as U.S. sales have slowed. Companies such as Deere & Co. have added factories abroad, or taken other steps to increase their international profiles on the promise that a development boom will continue for years. In fact, Deere opened a new tractor plant in Brazil last year to serve expanding farm economies there and in Argentina. Also, Brazil, Argentina and several other developing countries are becoming agricultural powerhouses. Brazil and Argentina together produce almost half of the world's soybeans, and just over a fifth of the planet's wheat grows in China. Deere, whose biggest business is agricultural equipment, is a major seller in South America and abroad. In its most recent quarter, Deere's profits were up 55% to $369.1M. The biggest reason, a 37% increase in sales outside the U.S. and Canada. Also reported in the company’s most recent quarter, Deere’s revenues were up 18%, and earnings per share of $0.83 were well ahead of the expected $0.78 per share. The company even made money in financial services, which experienced an 88.2% year-over-year gain led by its credit portfolio and crop insurance. Guidance for upcoming quarters was also solid, with management noting it would remain profitable in spite of weakening conditions in the United States.
Deere has been benefited from a combination of agricultural strength, some of it related to the production of ethanol, and a weak dollar that had begun boosting sales abroad. The company, which manufactures all manners of agricultural and forestry equipment, carries a P/E Ratio approaching 16 times for the fiscal year that ended in October of 2007. But with per-share earnings expected to increase by about 18% year-over-year, the P/E Ratio for the next year slides to about 13.4 times. Also worth noting is that the company's shares have risen almost 50% in the past year. In addition, a Banc of America Securities analyst recently backed his "Buy" rating for the company and boosted his price target by $1 to $94, saying that the company's increased profit expectations for 2008 show that the global agricultural cycle should remain strong. Deere expects rising farm income, high crop prices, low global crop inventories, and bio-fuel-related crop demand to support farm equipment demand in 2008, with a ramp up in large machines particularly favorable for the company in the long run. Expect Deere shares to continue to rise as a result of improving global agriculture industry fundamentals and the company's top position in the farm equipment industry.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Deere & Company engages in the manufacture and distribution of products and services for agriculture and forestry worldwide. It operates in four segments: Agricultural Equipment, Commercial and Consumer Equipment, Construction and Forestry, and Credit. The Agricultural Equipment segment offers a line of farm equipment and related service parts, including tractors; combine, cotton, and sugarcane harvesters; tillage, seeding, and soil preparation machinery; sprayers; hay and forage equipment; integrated agricultural management systems technology; and precision agricultural irrigation equipment. The Commercial and Consumer Equipment segment provides equipment, products, and service parts for commercial and residential uses, such as tractors for lawn, garden, commercial, and utility purposes; mowing equipment, including walk-behind mowers; golf course equipment; utility vehicles; landscape and nursery products; irrigation equipment; and other outdoor power products. The Construction and Forestry segment offers a range of machines and service parts used in construction, earthmoving, material handling, and timber harvesting, including backhoe loaders; crawler dozers and loaders; four-wheel-drive loaders; excavators; motor graders; articulated dump trucks; landscape loaders; skid-steer loaders; and log skidders, feller bunchers, log loaders, log forwarders, log harvesters, and related attachments. Its products and services are marketed primarily through independent retail dealer networks and retail outlets. The Credit segment primarily finances sales and leases by dealers of new and used agricultural, commercial and consumer, and construction and forestry equipment. It also provides wholesale financing to dealers of the foregoing equipment, provides operating loans, finances retail revolving charge accounts, offers certain crop risk mitigation products, and invests in wind energy generation. The company was founded in 1837, currently employs more than 52,000 workers and is based in Moline, Illinois.
U.S. heavy-equipment makers have taken refuge in growing economies overseas to ride out the downturn in the American economy. Growing economies abroad have kept American-made industrial and agricultural heavy equipment moving in China, India, the Middle East and elsewhere, even as U.S. sales have slowed. Companies such as Deere & Co. have added factories abroad, or taken other steps to increase their international profiles on the promise that a development boom will continue for years. In fact, Deere opened a new tractor plant in Brazil last year to serve expanding farm economies there and in Argentina. Also, Brazil, Argentina and several other developing countries are becoming agricultural powerhouses. Brazil and Argentina together produce almost half of the world's soybeans, and just over a fifth of the planet's wheat grows in China. Deere, whose biggest business is agricultural equipment, is a major seller in South America and abroad. In its most recent quarter, Deere's profits were up 55% to $369.1M. The biggest reason, a 37% increase in sales outside the U.S. and Canada. Also reported in the company’s most recent quarter, Deere’s revenues were up 18%, and earnings per share of $0.83 were well ahead of the expected $0.78 per share. The company even made money in financial services, which experienced an 88.2% year-over-year gain led by its credit portfolio and crop insurance. Guidance for upcoming quarters was also solid, with management noting it would remain profitable in spite of weakening conditions in the United States.
Deere has been benefited from a combination of agricultural strength, some of it related to the production of ethanol, and a weak dollar that had begun boosting sales abroad. The company, which manufactures all manners of agricultural and forestry equipment, carries a P/E Ratio approaching 16 times for the fiscal year that ended in October of 2007. But with per-share earnings expected to increase by about 18% year-over-year, the P/E Ratio for the next year slides to about 13.4 times. Also worth noting is that the company's shares have risen almost 50% in the past year. In addition, a Banc of America Securities analyst recently backed his "Buy" rating for the company and boosted his price target by $1 to $94, saying that the company's increased profit expectations for 2008 show that the global agricultural cycle should remain strong. Deere expects rising farm income, high crop prices, low global crop inventories, and bio-fuel-related crop demand to support farm equipment demand in 2008, with a ramp up in large machines particularly favorable for the company in the long run. Expect Deere shares to continue to rise as a result of improving global agriculture industry fundamentals and the company's top position in the farm equipment industry.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Tuesday, April 01, 2008
BetterTrades looks at Genzyme Corporation
U.S. biotechnology company Genzyme Corp. (GENZ) announced plans Tuesday to expand its manufacturing and research facilities in Ireland. The Irish government said it was offering assistance to subsidize the planned 130M Euro, $200M U.S., expansion of Genzyme's operations in the southeast city of Waterford. Genzyme set up its first manufacturing facility in Waterford in 2001 and plans to hire another 170 people, boosting its Irish work force to more than 600. The company stated that they plan to build a new production line for soft-gel capsules, expand its existing plant for filling medicine vials, and add lab and office space. Ireland, a country of 4.2M people, is a major European hub for drug development and production. Most of the world's biggest drug companies have manufacturing and R&D operations here that employ about 25,000 people. Trade, Employment and Enterprise Minister Michael Martin noted that half of all foreign corporate investments to Ireland so far this year have come from pharmaceutical and biotechnology companies and they constitute a crucial component of Ireland's economic landscape. The Genzyme move was the second major foreign investment this year for Waterford, a city known internationally because of its hand-cut crystal factory. Last month the Israeli generic drug-maker Teva Pharmaceutical Industries Ltd. (TEVA) announced a 65M Euro, $100M U.S., plan to expand its Waterford campus and boost its work force to 815 from 650.
Genzyme Corporation operates as a biotechnology company worldwide. It operates through five segments: Renal, Therapeutics, Transplant, Biosurgery, and Genetics. The Renal segment develops, manufactures, and distributes products for patients suffering from renal diseases, including chronic renal failure. This segment offers Renagel, a phosphate binder for the control of serum phosphorus in patients with chronic kidney disease (CKD) on hemodialysis; and Hectorol vitamin D2 pro-hormone products for the treatment of secondary hyperparathyroidism in patients with stages 3 and 4 CKD, and in patients with stage 5 CKD on dialysis. The Therapeutics segment provides Cerezyme/Ceredase, an enzyme replacement therapy for the treatment of Gaucher disease; Fabrazyme, a recombinant form of the human enzyme alpha-galactosidase for the treatment of Fabry disease; Thyrogen, an adjunctive diagnostic agent used in the follow-up of patients with thyroid cancer; Myozyme therapy for Pompe disease; and Aldurazyme, a recombinant form of the human enzyme alpha-L-iduronidase to treat mucopolysaccharidosis I. The Transplant segment offers Thymoglobulin, a polyclonal antibody that suppresses immune cells responsible for acute organ rejection in transplant patients. The Biosurgery segment markets Synvisc, a biomaterial used to treat the pain associated with osteoarthritis of the knee; and Sepra products for preventing adhesions following various surgical procedures in the body. The Genetics segment provides reproductive testing services, diagnostic services for reproductive and oncology markets, and genetic counseling services. The company was founded in 1981, currently employs more than 10,000 workers and is based in Cambridge, Massachusetts.
On of the key developments for Genzyme over the past months has been the partnership with Isis Pharmaceuticals (ISIS) in developing the cholesterol drug Mipomersen. According to the deal, Genzyme will pay Isis $325M upfront, with the potential for $825M more in milestone payments as the drug progresses through stage 3 trials. The deal marked the end of an auction for the drug in which up to 10 companies were interested. Genzyme's investment in Isis is for five million shares of the company at $30 a share, which is approximately 5.75% of Isis. Genzyme will also pay up to $1.58B more and the companies will split the profits if the drug reaches certain milestones. Looking at the potential of peak sales for Mipomersen, those figures being anywhere from $750M annually, which is estimated by industry analysts, to $3B annually would trigger further payments by Genzyme. It is believed that Mipomersen will be worth somewhere from $650M to $2.5B for Genzyme and from $485M to $2.5B for Isis based on peak sales. The two companies anticipate filing a non-disclosure agreement late 2008 or early 2009 for Mipomersen in the treatment of a rare disease called hypercholesterolemia. However, the drug would not be ready for any non-disclosure agreements for routine high cholesterol until at least 2010.
Looking ahead, shares of Genzyme have been on an upward trend for much of the past few weeks. This is due largely to the company reaffirming their outlook for long-term growth. The company said it expects profit growth, excluding charges and gains, of 20% over the next five years, with revenues growing between 16% and 17%. Genzyme makes one of the more compelling cases for sustainable long-term earnings growth. In 2008, the company expects profits of $4 per share, while analysts polled expect profits of $4.01 per share. This latest strength should be considered a great buying opportunity. The stock had a strong move over the last few weeks and may move sideways for some time but the charts signal a breakout and the stock should move towards previous highs of $82 a share, set back in the middle of January. Genzyme stock has been showing support around $71.10 and resistance in the $79.40 range. Technical indicators for the stock are Bearish and S&P gives GENZ a very positive 5-star, out of 5, strong buy rating. Genzyme expects revenues to reach $4.5B to $4.7B in 2008, along with earnings to increase to approximately $2.75 per share in the upcoming year.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
Genzyme Corporation operates as a biotechnology company worldwide. It operates through five segments: Renal, Therapeutics, Transplant, Biosurgery, and Genetics. The Renal segment develops, manufactures, and distributes products for patients suffering from renal diseases, including chronic renal failure. This segment offers Renagel, a phosphate binder for the control of serum phosphorus in patients with chronic kidney disease (CKD) on hemodialysis; and Hectorol vitamin D2 pro-hormone products for the treatment of secondary hyperparathyroidism in patients with stages 3 and 4 CKD, and in patients with stage 5 CKD on dialysis. The Therapeutics segment provides Cerezyme/Ceredase, an enzyme replacement therapy for the treatment of Gaucher disease; Fabrazyme, a recombinant form of the human enzyme alpha-galactosidase for the treatment of Fabry disease; Thyrogen, an adjunctive diagnostic agent used in the follow-up of patients with thyroid cancer; Myozyme therapy for Pompe disease; and Aldurazyme, a recombinant form of the human enzyme alpha-L-iduronidase to treat mucopolysaccharidosis I. The Transplant segment offers Thymoglobulin, a polyclonal antibody that suppresses immune cells responsible for acute organ rejection in transplant patients. The Biosurgery segment markets Synvisc, a biomaterial used to treat the pain associated with osteoarthritis of the knee; and Sepra products for preventing adhesions following various surgical procedures in the body. The Genetics segment provides reproductive testing services, diagnostic services for reproductive and oncology markets, and genetic counseling services. The company was founded in 1981, currently employs more than 10,000 workers and is based in Cambridge, Massachusetts.
On of the key developments for Genzyme over the past months has been the partnership with Isis Pharmaceuticals (ISIS) in developing the cholesterol drug Mipomersen. According to the deal, Genzyme will pay Isis $325M upfront, with the potential for $825M more in milestone payments as the drug progresses through stage 3 trials. The deal marked the end of an auction for the drug in which up to 10 companies were interested. Genzyme's investment in Isis is for five million shares of the company at $30 a share, which is approximately 5.75% of Isis. Genzyme will also pay up to $1.58B more and the companies will split the profits if the drug reaches certain milestones. Looking at the potential of peak sales for Mipomersen, those figures being anywhere from $750M annually, which is estimated by industry analysts, to $3B annually would trigger further payments by Genzyme. It is believed that Mipomersen will be worth somewhere from $650M to $2.5B for Genzyme and from $485M to $2.5B for Isis based on peak sales. The two companies anticipate filing a non-disclosure agreement late 2008 or early 2009 for Mipomersen in the treatment of a rare disease called hypercholesterolemia. However, the drug would not be ready for any non-disclosure agreements for routine high cholesterol until at least 2010.
Looking ahead, shares of Genzyme have been on an upward trend for much of the past few weeks. This is due largely to the company reaffirming their outlook for long-term growth. The company said it expects profit growth, excluding charges and gains, of 20% over the next five years, with revenues growing between 16% and 17%. Genzyme makes one of the more compelling cases for sustainable long-term earnings growth. In 2008, the company expects profits of $4 per share, while analysts polled expect profits of $4.01 per share. This latest strength should be considered a great buying opportunity. The stock had a strong move over the last few weeks and may move sideways for some time but the charts signal a breakout and the stock should move towards previous highs of $82 a share, set back in the middle of January. Genzyme stock has been showing support around $71.10 and resistance in the $79.40 range. Technical indicators for the stock are Bearish and S&P gives GENZ a very positive 5-star, out of 5, strong buy rating. Genzyme expects revenues to reach $4.5B to $4.7B in 2008, along with earnings to increase to approximately $2.75 per share in the upcoming year.
For more information on the stock and options markets check out the wealth of information at BetterTrades.
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